Diverse portfolio of assets helps rural estates perform

Diverse portfolio of assets helps rural estates perform

Over the past 16 years there have been significant changes in the make-up of the portfolio of rural estate income, which is a key theme of Savills recently published Estate Benchmarking Survey. This diversity of income is now probably more important than at any other time, given the uncertainties presented by Brexit and the increasing volatility across global markets.

Rural estates in England enjoyed a second consecutive year of improved performance, with a 2.5% growth in gross income on all estates. Increased income from the residential portfolio was the principal contributor to this growth.

Crispin Mahony, of Savills Winchester, said: “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.”

In 2000, agriculture contributed nearly 49% of gross income and residential property nearly 37%; today these are almost reversed at 37% and 43% respectively. Also, other revenue streams, including commercial property and leisure enterprises, are making a greater contribution.

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

Estates are also looking at house building. Our survey suggests 28% of estates plan to build more homes on their land and 40% will look to sell land to developers.

In the 12 months to April this year,…