Diversity helps ‘insulate’ rural estates from economic and political upheaval

Major changes in the makeup of the portfolio of rural estate income in recent years is now probably more important than at any other time given the uncertainties presented by Brexit and the increasing volatility across global markets, according to a new report.

The Estate Benchmarking Survey, published by Savills, shows that rural estates in England enjoyed a second consecutive year of improved performance at +2.5% with increased income from the residential portfolio the principal contributor.

In 2000, agriculture contributed almost 49% of gross income and residential property nearly 37%, today these are almost reversed at 37% and 43% respectively. Other revenue streams, such as commercial property and leisure enterprises, also now make a greater contribution.

Savills report that increasingly, estate owners are recognising the need to have multiple income streams in order to balance out market fluctuations. Likewise, they are taking advantage of new income sources, when they arise.

Savills highlight the renewable energy sector into which a number of estates have invested as a good example. For those estates which actively participate renewable contributed £9.60 per acre to gross income in 2016, almost double the £5.00 recorded in 2014.

Also estates are increasingly looking at housebuilding. Savills’ survey suggests 28% of estates plan to build more homes on their land and 40% will look to sell land to developers.

Savills fully expect the residential sector’s contribution to gross income to continue increasing. In the 12 months to April this year a 15.3% rise was recorded. Estates are actively seeking the best rents by upgrading properties when they become available.

Overall, the strongest rental growth is for the smaller properties, but there is anecdotal evidence over the past year of strengthening lifestyle demand for renting, rather than buying larger country houses.

Ian Bailey Savills research commented: “The diverse asset base of these estates insulates them from changing economic and political fortunes more effectively than many less diverse businesses.

“Over the history of our estate benchmarking survey, we have seen how the contributions of the core assets to income have changed.”