WHAT MAKES AN ENTERPRISING ESTATE
by ROB HINDLE
In the last thirty years, Rural Solutions has gathered a unique understanding of rural diversification.
Our exclusive focus on rural Britain and accelerated growth across the business with our advisory, planning and design teams developing ever deeper and diverse skills, expertise and experience, has turned us into the market leader we are today.
And our motivation, in common with our clients, is an economically sustainable countryside.
Reflecting on this experience, we have put together a review of what we believe are the defining characteristics of an ‘Enterprising Estate’ in today’s rural world.
Words such as ‘proactive, passionate, collaborative, focused, fun, innovative and receptive’ are all terms we would associate with our most successful clients.
Through working with these dynamic, forward-looking landowners and rural entrepreneurs, we have a privileged insight into the characteristics that shape success in estate and farm diversification.
Our annual client sentiment survey, carried out in July this year, has borne out our judgment that, despite surrounding uncertainty, confident land-based businesses are seizing the moment, to reshape and reposition for a more sustainable and diversified future.
Roughly seven out of 10 of our clients are committed to investing in rural enterprises, despite political uncertainty. Indeed, the uncertainty is galvanising UK land and estate owners to move away from reliance on traditional incomes such as farming and tenancies and invest in new enterprises in the countryside.
A quarter of landowners in our survey, which covered over 250,000ha of England, Scotland and Wales, felt more optimistic about their business prospects now than at the start of 2019. But this year, not one of our clients said they planned to diversify within farming and investing in further acreage was highly unattractive.
Land-based businesses are seeing the escalating uncertainty as a catalyst for action.
What we are seeing – and what we definitely endorse – is that enterprising, forward-looking land-based businesses are committing to reshaping and repositioning their business to give it the best chance of thriving in a new era. Paradoxically, the greater the unknowns, the greater the confidence to take matters into their own hands. They have had time to digest that we are living in precarious times and they are not willing to rest on their laurels any longer. They have priced in the Brexit risk – agricultural support payments are on the decline, government attitudes to landlords, public good and planning consent may change – and are ready to shift from a farming and investment focus towards a broader diversified and trading enterprise in order to defend earnings and drive a vibrant rural economy.
WHAT ARE THE HALLMARKS OF AN ENTERPRISING LANDOWNER?
Here are some of the key identifiers that we have surmised through our experience:
- They think like a business, not like an asset owner. Their focus is on optimising the return their asset base can provide.
- They look for bespoke solutions. This means not following the herd, not replicating approaches taken by others, but rather finding the enterprise that best fits their mission, and which represents the best combination for them of site and market opportunity.
- They are more focused on profit than revenue. They look at net earnings rather than volume, weighing up risk and assessing relative return on investment, not just from capital, but in terms of time, energy and emotion.
- They use evidence, not guesswork and anecdote; testing and cross-referencing views and advice, bringing in specialists to challenge generalists. They respect an entrepreneurial ‘gut’, however, and know that insight and a feel for market nuance are key to their decision making.
- They are honest about skills and capacity – and are not frightened to incur the costs of acquiring the new skills needed to make a success of a new venture. They are willing to employ people with skills they don’t have; they often need to think particularly hard about B2C skills, customer service, marketing brand and digital communications. They are confident but humble enough to be good employers.
- They find imaginative planning and design solutions – approaching the planning process, not as a boring regulatory hurdle that needs to be cleared, but as an opportunity to promote their ideas, to attract support and work in partnership with interested parties. They think about landscape and environment, investing in understanding the site and the impact their proposals may have upon it. They design the scheme in response to, rather than despite these sensitivities, and look for collaboration rather than conflict.
- They are deliberate about identifying and mitigating risk. This is key when going into markets you don’t understand or have experience of, the risk appetite might be different, the kinds of external risks might be outside your past experience.
Almost all our clients need access to finance to take forward their new enterprises and diversifications. In our view, bank finance is attractive right now, long-term money is cheap, and is an important part of a blended funding package including personal investment and sometimes, land or asset sales to generate capital.
Great Tew and Bantham Estates are a good example of how a client exhibits these characteristics. Each existing facet of the businesses has been reviewed, addressed and enhanced, starting with farming, then minerals and residential lets.
At each stage, the estate team has sought to add value and make the most of their opportunities. For example, identifying a need for grain storage, they developed at a scale where they can sell storage to others. Addressing a need for investment in plant and machinery in the iron stone quarry to extend their reach into more valuable markets, they acquired other sites to achieve critical mass.
Faced with a significant repair and renovation liability across the residential stock, they decided target the section of the market willing to pay the highest rents.
Once these existing elements were optimised, additional enterprises and opportunities were created, adding to the stock of property available to let or sell on long leases, leading to the creation of Soho Farmhouse. Investing in a new estate in an area of high landscape value to provide a bolt hole away from the increasingly busy home estate, and all being well, a new property development venture to develop housing and garaging for classic car enthusiasts with access to their very own racetrack.
These bold but sound decisions have provided the estates with a broad set of investments that can be relied upon and reflect their confidence to strike out on their own path rather than meekly follow the herd for limited success.
As experts in the field, we recognise that there are some particularly attractive market trends to consider, given the right site, skills, geography and catchment.
We see untapped potential in ‘Play’. Whilst the traditional house and garden, farm park and adventure playground have enduring appeal, more immersive and experiential play-based attractions are gaining traction, for young and for old. Successful ventures are: BeWilderwood in Norfolk, hitting the spot by proving a space to encourage imagination and exploration in younger children, and the Zip World portfolio in North Wales, selling exhilaration and excitement accessible to all.
HEALTH & WELLBEING
Rural settings have an inbuilt advantage in the trend for ‘wellness tourism’ – new kinds of health and wellness facilities, treatments and experiences all rooted in nature.
Success here relies on a combination of quality of place, environment and customer service. Delivering relaxation requires exceptional attention to detail. An example, Avalon Health & Wellbeing.
This sector continues to see a seismic change in customer demand, driven by venture capital funded online booking platforms and algorithmic pricing. Self-catering holiday accommodation from cottages to large houses to camping, motorhomes and caravanning remain popular and glamping, where ever more innovative types of structure continue to emerge – is a relatively low impact and reversible diversification activity which, with the right product in the right place, can generate high yields – as many suppliers will tell you, a £50,000 Shepherds Hut or Camping Pod can readily pay for itself in less than three seasons.
The sector is not without its risks and demands, however. Occupancy levels are key, the online route to market is increasingly becoming consolidated by some very big players and meeting customer expectations means constant change and re-investment.
Commercial property is, again, not a new area for rural diversification and indeed this is where Rural Solutions was the pioneer 30 years ago. However, things have evolved, and new developments are looking towards flexible co-working packages, offering home workers, micro-businesses and the self-employed access the blend of facilities available in a high-end modern office and hotel alongside the added benefits of an attractive rural location. Several operators have established in rural areas and are actively looking for sites.
TIME TO TAKE ACTION
This is the time to take a serious view of estate resilience and develop the right business strategy.
‘Enterprising Estates are those which proactively seek profit. They are confident, willing to change and accept risk. They optimise returns and impacts across their interests. They achieve this through the identification and successful pursuit of new opportunities alongside effective and efficient management of existing activity.’