Model Estate performance 2025

Sophie Davidson

Sophie is a Senior Analyst in the Research team at Carter Jonas, reporting on market trends and themes across both the rural and commercial divisions.

The Model Estate report has been featured for more years than I can remember, lastly in 2024 Summer Terrier. It provides useful short and long-term trends and comparisons for asset classes typically managed by local authority surveyors. 

About the Model Estate 

The ‘Model Estate’ is a hypothetical agricultural estate created by Carter Jonas in 2010. The Estate has evolved over the years and comprises over 3,000 acres. It includes a combination of let and in-hand farms, a commercial and residential portfolio, a telecoms mast, fishing rights, a syndicate shoot, a solar farm, an Option to Lease for a 100MW Battery Energy Storage System (BESS), and a quarry. It is located within the geographical triangle bounded by the M4, M40 and M5 motorways. 

In using the example of a mixed rural estate, similar in structure to many under the management of Carter Jonas, we gain an interesting and helpful insight into the performance of a rural estate and the dynamics at play. This enables us to make strategic recommendations for the future. 

Please note that all findings in this report are based on valuations undertaken on 31 December 2024. 

Overview performance 

The overall valuation of the Model Estate totalled £53.92m in December 2024, representing an annual increase of 4.6% against a value of £51.54m in 2023. An acceleration in growth (up from 2.8% in 2023) offers a reassuring signal, suggesting underlying resilience as rural estates prepare for forthcoming policy changes. 

Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) from Inheritance Tax are set to take place in April 2026, which have created a pressing need for a proactive approach to estate planning, likely including an assessment of the estate’s value and structure. Nonetheless, the data presented underscores buoyant investor sentiment, with an evolving value proposition that leverages the adaptable character of rural estates. 

The 2024 growth surpasses the CPI inflation rate of 2.5% at the end of the year. Over the longer term, 10-year capital growth decelerated slightly but still returned an impressive 3.9% annualised growth rate, or 46.2% cumulatively. When adjusting for inflation, the Model Estate achieved a positive annualised growth rate of 0.8%, translating to an admirable overall increase of 8.4%. 

While there was the expected variation in performance across the different assets, only the commercial portfolio ended the year in negative territory, albeit by a negligible -0.1%. The Estate’s renewable energy assets were the top performer by year-on-year increase. As a result, their share of the Estate’s overall value doubled from 1.8% to 3.6%. The quarry, which accounts for 11.5% of the Estate’s value, also performed well, albeit more subdued than the previous two years. 

Value of the Model Estate 2024

Agricultural land remains a key component of the Estate's valuation, accounting for 55.8%, and so is a key determinant of value change. That said, this marks a significant change from the 68.7% recorded 10 years prior, attesting to the growing trend of diversification on traditional estates. Both the in-hand and let farmland experienced notable growth over the year, reflecting the continued appeal of farmland assets. Driven by ongoing shortages in the rental sector (putting upward pressure on rents) and a recovering housing market, the let residential assets also delivered healthy gains. However, the value of the manor house and the ‘other’ assets maintained their value. 

Component performance 

Renewable energy: 113.1% 

The Estate's renewable energy assets, comprising a solar farm and a BESS, achieved a standout 113.1% year-on-year value increase, reaffirming their status as the Estate's top performers. 

The Estate reallocated 5 acres of arable farmland to a 100 MW BESS development last year. Due to the intermittent nature of renewable energy sources, there is a growing demand for BESS. An Option to Lease agreement was signed with a BESS developer. It has now received planning permission and the lease has been triggered. The full value of the BESS lease won’t be realised until the site is operational with a track record. However, the hope value has increased significantly, indicating strong prospects for future gains. 

Quarry: 5.0% 

Quarry sales remained flat this year, falling short of productivity targets as anticipated market demand from housebuilding, commercial and infrastructure projects didn't fully materialise. Despite an 8% inflationary increase in lease revenues, lower productivity offset the expected gains. 

Efforts to restore previously worked land at the quarry through infilling with inert waste materials have commenced, although it is expected that a 12-month period will be required to capture further market share for available inert waste materials. During this period, it is hoped that waste arisings will increase as bulk fill and soil materials generated by regional muck-away projects grow. Such growth depends on increased starts in development projects. 

The capital value of the quarry has performed relatively well, maintaining an increase in reported annual growth, albeit starting to plateau due to underperforming markets and sales. A positive lease structure and rent review mechanism are mitigating some negative impacts, but full benefits await a recovery in market demand for mineral products. 

Residential: 4.0% 

The Estate’s let residential assets appreciated by 4.0% year-on-year, accelerating from 1.4% the year before. While growth has moderated from the elevated levels of 2022 (when values increased by 15.8%), it remains robust, mirroring wider market dynamics. 

At a national level, the housing market largely recovered from its downturn and had regained the losses seen by April 2024 after falling from July 2023. Meanwhile, tenant demand in the private rented sector is unprecedentedly high, illustrated in elevated levels of rental growth. Rent reviews on the Estate have resulted in rental uplifts of 9.0%, reflecting national increases reported by the Office for National Statistics. 

Looking forward, downward pressure on pricing could arise from new and anticipated policy changes, impacting investor appetite and the viability of holding older assets. The Renters' Rights Bill proposes several key changes, such as the abolition of no-fault evictions and fixed-term tenancies, and the introduction of rent control measures. 

The government is also proposing to increase the minimum EPC rating for rental properties from E to C for new tenancies from 2028, and all existing tenancies from 2030. Rural estate cottages are categorised by their traditional construction and often present energy efficiency challenges. Addressing these may incur significant capital expenditure and outweigh the financial benefits of holding the property. Estate owners may therefore consider the disposal of off-lying properties. 

Let farms: 3.2% 

The value of the let farmland increased by 3.2% over the year, picking up pace from 2.1% growth the year before. This is largely due to a stark supply and demand imbalance in land to rent, and despite uncertainties in the wider farmland market and more subdued growth in commercial arable and pasture land values. 

The latest data from Defra shows that land rented on Agricultural Holdings Act (AHA) tenancies has continued its downward trend. In the 12 months to June 2024, the area of land rented on AHAs fell by 2.1%, following a 3.6% decline the year before. The area of land rented on Farm Business Tenancies (FBT) also fell, but by a more moderate 0.3%, following a 1.0% drop the previous year. This suggests that land on AHA tenancies that ended with no successor was not necessarily re-let on a new FBT. 

Driven by the potential financial returns of non-agricultural uses, landowners are increasingly removing land from the rental market for alternatives. While the impact of evolving policies and schemes on the sector unfolds, land management patterns will likely continue to shift as landowners evaluate their economic benefits (both in income and capital gains). 

Changes to APR and BPR present further potential for a decline in the let farm sector. The Tenant Farmers Association expressed concerns that tenant farms will be brought in-hand to increase the proportion of trading assets (relative to investment assets, as per the Balfour principle) to maximise BPR and reduce tax liabilities. It may also be the case that tenanted land will be sold to cover tax bills. 

As such, it is no surprise that rents continue to push upwards. Nationally, rents on FBTs increased by 2.7% in the year to March 2024 (Defra). Regionally, in Southern England, our own dataset suggests that openly marketed FBT rents tend to exceed national averages. 

In-hand farmland: 3.0% 

The Estate's in-hand farmland portfolio saw a 3.0% year-on-year uplift, continuing its four-year upward trend. This performance, while slightly below last year's 3.4% growth, indicates the ongoing resilience of the land market in the face of structural change and economic volatility. Given farmland's substantial portion of the Estate's total value, its gains were a key driver of the year's overall growth. 

The value of the in-hand arable land has risen from £10,250/acre to £10,500/acre, representing a 2.4% increase, while the in-hand pasture land increased from £8,732/acre to £9,000/acre, a 3.2% increase. Alongside the agricultural land, the in-hand portfolio includes a farmhouse and 60 acres of woodland. The farmhouse saw its value increase by 5.2%, broadly in line with national house price growth for detached houses (5.0% as per HM Land Registry), and the woodland increased in value by 4.9% overall. 

The in-hand farmland outpaces national trends for average arable and pasture land. Land values are becoming increasingly polarised, with higher-quality land in desirable locations increasing at a faster rate. This trend accelerated in 2024, with uncertainties arising from the change in government and the potential of shifting political priorities, creating sensitivity in pricing in some parts of the market. Conversely, there is sustained demand for well-positioned assets from an array of buyers, notably rollover funds benefiting from Business Asset Rollover Relief (particularly in the southern regions). 

Manor House: 0.0% 

The market for large country houses in the UK has been cautious, with some buyers who require finance still hesitant to invest more capital while borrowing costs remain high. Recent changes to the ‘non-dom’ regime and other changes to tax policy (including increases to the rates of Capital Gains Tax and Agricultural and Business Property Relief) have tempered sentiment at the upper end of the market. 

While those houses that have come to the market have been met with sufficient interest, primarily from cash-rich buyers, they have generally sold at their guide prices, resulting in stable values. As such, the value of the Estate’s manor house and accompanying gardens has held firm for the third year in a row. 

Other: 0.0% 

The value of the sporting rights, telecoms mast and fishing rights have also held firm over the last year. These assets continue to generate a steady income, with an overall yield of 13.0%. 

Commercial: -0.1% 

The Estate's commercial assets saw a slight dip in value this year, continuing a trend of marginal decreases for the third consecutive year. This fractional decrease underlines the relative stability of the UK commercial property sector compared to recent years, which has been facing varying degrees of structural change and subsequent price adjustments. 

Formerly agricultural buildings, the Estate’s commercial portfolio comprises fully let office and industrial assets. Rents stand at £14.50/sq ft for the office assets, while rents for the industrial assets vary from £3.72/sq ft for a former aircraft hangar to £6.25/sq ft for a workshop unit, all unchanged from 2023. 

The office market is showing signs of recovery. After increasing since 2020, office vacancy rates now look close to peaking, and office occupancy rates have also shown a modest improvement (Remit Consulting). Coupled with the cost-effectiveness and appeal of the natural surroundings that rural offices offer, this should positively impact investor sentiment and help maintain the Estate’s office asset values. 

Yet, downside risks remain, particularly as the shift to prime, city-centre space with sustainability credentials continues. This trend is being accelerated by the next round of tightening to minimum energy efficiency standards (MEES) regulations, with a minimum EPC rating of C due to take effect from April 2027. Many rural properties will need upgrades to meet compliance standards, and some estates may choose to repurpose or sell off assets where capital expenditure cannot be justified by the expected rent. 

Although industrial vacancy rates have been rising over recent quarters, attributable to a combination of slowing demand and rising supply of available space, vacancy at the national level now appears to be levelling off. With a robust outlook for demand and relatively little new supply coming through, we think vacancy will peak this year and begin to decline, which is encouraging for those with an industrial portfolio. 

That said, like offices, demand for industrial units is also focused on prime, energy-efficient space, particularly as many operators are promoting their ability to maximise their clients’ sustainability credentials within the supply chain. Given the strong underlying demand conditions, we expect continued rental growth for industrial space over the next 12 months, depending on the type, quality and location of the property. 

Ed – The Model Estate report 2025 does not include the usual comparison to other asset types. Markets have been very turbulent and reporting would be dated quickly. Sophie has indicated that she hopes to pick this up later in the year.