Research article

Change: a positive impact on the bottom line

Across the regions, agricultural and residential assets still provide the core income for rural estates. Proactive management must continue to draw income from a greater range of assets

The structural change across rural estates over the past 20 years suggests proactive management of the property assets to increase income and reduce risk. This has been done by disposing of poor-performing assets, such as land and residential properties, and starting new income streams by developing commercial workspace and diversifying into alternative enterprises (see Driving resilience into estate income).

Results from our 2017 Estate Benchmarking Survey show that average gross income across all estates in England rose by 2% to £230 per acre. Although estates are drawing income from a range of assets, core income (80%) comes from agricultural and residential assets.

Figure 3

FIGURE 3Costs as percentage of gross income*

Source: Savills Research | Note: *Five-year average to iron out volatility

Costs and net income

Our research shows that, as a proportion of gross income, average costs across England have remained under control (see table above). Net incomes have averaged 55% of gross income over the past five years.

Figure 4

FIGURE 4Income source by region Agricultural and residential assets still make up core income

Source: Savills Research

Figure 5

FIGURE 5Income source by region The proportion of income derived from agriculture depends on the strength of markets for other assets

Source: Savills Research

Agricultural income

The chart (above) shows the range of contributions that agriculture makes to estate income – from 20% in the South East of England to 66% in the East Midlands.

These contributions, at a regional level, are related to the strength of the markets for the other sectors, with variations at estate level depending on the mix of assets. The threats of Brexit are mitigated where the contribution of other income streams is high.

The table (below) shows average agricultural passing rents and growth across England as reported in our 2017 Estate Benchmarking Survey. More information on rents can be found in our Agricultural Rents Survey and Scottish Estate Benchmarking Survey 2017.

Figure 6

FIGURE 6Average agricultural rents There is also a range across soil and enterprise types

Source: Savills Research

Residential income

Residential property provides a core income source for estates. The average assured shorthold tenancy rent across England is £9,800 per dwelling. Again, there is significant regional variation depending on location (proximity to large centres of population) and demand. The highest average AST rents, at £13,500 and £10,500 per dwelling, are in the South East and East of England respectively. In the more remote areas, average rents are significantly lower (£7,800 in the East Midlands).

Average annual residential rents by house type across England range from around £25,000 for a large, detached five- or six-bedroom house to around £7,200 for a one- or two-bedroom flat.

Figure 7

FIGURE 7Average residential rents AST rental growth is weaker for larger properties

Source: Savills Research

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Simon Smith

Simon Smith

Senior Director
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