Huge untapped potential still exists in the rural sector for farmers and landowners to diversify, according to land and property specialist Strutt and Parker. Rural businesses have only ‘scratched the surface of possibility’ when it comes to farm diversification, Ed Mansel Lewis, head of Strutt and Parker’s farm diversification team Rural Ambitions, has said.

The land agent has just published a new report on The Future of the Estate looking at opportunities for rural estates to generate new income streams.

“Farm Business Survey data for England shows that 68 per cent of farms had some sort of diversified activity in 2019/20, up from 65 per cent in 2018/19,” Mr Masel Lewis said. “However, this figure drops to below 50 per cent when the letting of buildings for non-agricultural use, the main diversified activity that landowners tend to have, is excluded.”

Agri-Tourism

He added this meant only a relatively small proportion of businesses had introduced customer-facing enterprises, with huge potential for businesses in the tourism, hospitality, food processing, leisure, well-being and retail sectors.

“Of course, diversification will not be an option for everyone, but at a time of huge change within the rural sector it could prove to be an important source of additional income for those that can,” he said.

The ideal diversification will vary according to the farm or estates assets, the owner’s aspirations, location and the needs of local communities. He highlighted the demand for access to green space during the pandemic, with land-based businesses able to use their beautiful spaces as a vehicle to attract customers.

“Similarly, it is anticipated that after Covid-19 there is likely to be a much greater focus on public health, which could be another opportunity for landowners, given research proves that access to the countryside is beneficial for health and well-being,” he said. “Alternatively, while people have generally embraced the shift to homeworking, the novelty has started to wear off for some who would prefer a mix of working from an office and remotely. This means there could be a growing appetite for shared office space or serviced offices in rural locations.

“The environmental agenda is also opening the door to new customer-facing businesses – with consumers increasingly seeking guilt-free experiences with a low carbon footprint. The good news for farms and estates is that they have plenty to offer that society wants and the key to the future is working out how best to harness that demand.”

Farm Diversification Skills

Mr Mansel Lewis added for those with the right entrepreneurial skills, diversification could involve the launch of their own in-hand businesses but it was not the only option. For many landowners, it may be more beneficial to work with trading partners or tenants.

“This can help people avoid the pitfall of spreading themselves too thinly across their core business,” he said. “Central to the success of any new enterprises will be thinking about how to create a ‘destination’. This is the art of ‘placemaking’ – a process based on the premise that in order to create new, profitable and diverse businesses you need to invest in the attraction and desirability of the location where they are based.

“At its simplest, it is about creating a location in which people are more likely to want to live, work and spend their leisure time and money. Traditionally, many farm and estate owners approach diversification on a one-off building or project basis, rather than stepping back and considering the customer experience.”