Commercial and leisure income

Despite the current economic climate the income generated from these sectors continues to rise and represents a healthy 20% of gross income. However, all commercial workspace rents, with the exception of light industrial, have weakened. Average office rents fell -5.4% in 2010 to £8.76 per sq ft. Let retail and storage/ distribution units recorded falls of -8.4% to £9.49 per sq ft and -6.3% to £2.51 per sq ft respectively.

In contrast, rental income for units let for light industrial use strengthened by 11% to £3.49 per sq ft, which is at odds with the mainstream commercial market. Commercial workspace rental levels follow a similar pattern to residential rents with the highest rents achieved in the South East of England.

The most significant change to this sector was the income derived from telecom masts, which fell -17% in 2010 to £6,055 per mast. This does not necessarily represent actual market evidence for the purposes of assessing Market Value, but is likely to reflect consolidation by the operators as they strive to reduce site numbers. Proactive management to achieve realistic deals going forward may mitigate the potential size of any income reduction from these assets.

Other income

Income from all other sources – which include woodland, sporting, minerals and wayleaves – came under pressure in the 2010 survey year and represented 7.4% of gross income compared with 9% in 2009.

The most significant reduction was recorded for mineral income, which fell by more than half to £3.80 per acre (£9.40 per ha), which can largely be explained by the current lack of demand from the construction industry.

Investment performance

Our research shows a significant improvement in the investment performance of rural estates in 2010 with an average total return from All Let Property across ‘All Estates’ of 7.1% (net income 1.4%, capital growth 5.7%), which is significantly higher than the 1.9% recorded in 2009 (see Graph 5 in the gallery).

Positive capital growth (4.4%) of the residential assets in 2010 compared with the -9% fall recorded in the 2009 survey contributed to this improved performance. The performance of rural estates remains competitive and has outstripped commercial property and bonds, which according to IPD property indices have shown returns of 3.5% and -0.3% in the year to December 2009.

Our research shows that annualised over three, five and ten year periods, rural property has consistently outperformed the main investment asset classes.

Taken from
Estate Benchmarking Survey 2010