New research from national property consultancy Carter Jonas reinforces the importance of farms and estates having a diverse range of business interests. 
 
The 2022 Model Estate report, which tracks the performance of various asset classes over a 12-month period, shows rising land values and a strong property market are currently the key drivers of growth.  
 
The report studies the financial returns from let and in-hand farming operations, commercial and residential property, telecoms, fishing rights, shooting and quarrying. The performance figures are then applied to a notional 3,168-acre mixed estate. 
 
The latest results show overall growth of 5.7%, amounting to a total value of £46.88m at 31 December 2021. Inflation rose at 4.8% during the year, so the Model Estate’s growth was strong. 
 
The firm’s researchers show that arable land has increased in value by just over 5%, with grassland growing at 6.85%, while the value of let property and manor houses grew by 15.8% and 12.8% respectively. 
 
By contrast, income from let commercial property remained flat, but continues to be an important part of an estate’s make-up. 
 
Carter Jonas Head of Rural, Tim Jones, said: “A surge in the value of the residential market had a significant impact on the estate’s value, both in terms of the let property and the manor house. 
 
“Let and in-hand farming operations also contributed to a much greater extent than in the previous year. 
 
“Our research demonstrates how diversity among assets helps to spread risk and allows different classes to contribute, rather than relying on one particular investment.”
 
An important new addition to the latest Model Estate report is an assessment of natural capital assets ahead of changes to food and farming policy. For the first time, researchers assessed which of the estate’s assets could be ascribed a natural capital value, and the opportunities this could create to earn a new income stream. 
 
Projected figures show the potential for carbon trading and biodiversity net gain compared with the existing Countryside Stewardship income many farm and estate owners will be familiar with. 
 
Carter Jonas noted that the easing of pandemic restrictions from the start of the year stimulated activity in various markets, subsequently fuelling a substantial uplift in the residential components of the estate. 
 
Valuer Christopher Rhodes said: “Economic turbulence returned at the close of the year with the rise of the Omicron variant, allied to soaring inflation. Although growth was positive overall, weaknesses in the economy, notably supply chain issues and resultant decrease in net trade has negatively impacted some elements of the estate. Coupled with incoming policy changes in the wider market, growth was constrained in the latter months.” 
 
Looking ahead, Mr Rhodes said flexible working, coupled with the want and need for more space, would continue to drive the residential market in the coming months.
 
The Model Estate’s manor house value increase echoed the growth of the prime country house market which has outperformed other rural assets in recent years.
 
The values of the estate’s quarry, telecoms mast, commercial shoot, solar farm and fishing rights have all remained stable. 
 
“Multi-asset estates are partially protected from income volatility due to their diversity,” says Mr Jones.
 
“While there remains uncertainty in the wider economy, many rural estates will continue to provide opportunities for capital growth through development and assest release opportunities.

“This includes the release of farms and residential properties from.multigenerational occupation arrangements or restructuring holdings which may release valuable farmstead sites or strategic land for development.”
 
Seeking guidance from experts is key in order to maximise a site’s potential, Mr Jones said. 
 
“Our work demonstrates that farming continues to have good years and bad years – and there are many challenges ahead with the phasing out of support payments, soaring costs of production, and new environmental policy to bed in,” he said. 
 
“We continue to advise landowners to develop a range of income streams, making their assets work harder and helping to improve the overall profitability and sustainability of their businesses. 
 
“Spreading risk by making the most of the opportunities available remains the wisest course of action.” 
 
The full Model Estate report is available online here.