Aspects of Land Spring 2013
    Rising agricultural land prices

    Aspects of Land Spring 2013

    How landowners and farmers can position their businesses for growth in a rapidly changing rural economy

    Download the full version of Aspects of Land Spring 2013 or read three extracts from the publication using the tabs below.

    The Growth Factor

    Making the most of rising land prices

    Agricultural land prices may have doubled over the past five years but our research suggests that the next five years will see continued growth.

    According to Savills research, farm values are likely to grow a further 5-10% a year for the next five years, depending on location and quality. So what can farmers do to make sure they gain full advantage of this growth?

    Farms looking to expand

    “Many farmers want to continue to expand their businesses to improve economies of scale,” says Alex Lawson of Savills Rural Agency. “Arguably it is a good time to borrow money for growth, as interest rates are pretty benign and banks are keen to lend to the farming sector.”

    However, the balance of growth is likely to change in the coming years. “Five or six years ago, it was all about mixed residential estates,” explains Alex. “Now commercial farms are in greatest demand as residential values have suffered. But logic suggests mixed residential and sporting farms and estates have become undervalued and prices will come back up at some point. So there appears to be a strong argument to create a more diverse portfolio.”

    Savills Estate Benchmarking Survey and Estates Index show that diverse assets provide more secure income and capital growth during difficult economic times, and are therefore a good base for future growth.

    “Having a mix of enterprises helps to overcome income volatility, as well as providing a hedge against capital value volatility,” says Ian Bailey of Savills Rural Research. “This diversity will continue to be important as large swings between the peaks and troughs of commodity prices become the norm and the macroeconomic situation remains bleak in the short-term.”

    Rural asset management

    Making the most of existing assets will help to diversify a business and increase profit. “A regular review can identify the most efficient use of resources,” explains Ian. “This might include restructuring farm tenancies to maximise rent levels and capital values, as well as looking into new capital projects and releasing non-essential strategic assets to reinvest elsewhere.”

    Opportunities still exist to create income from the residential sector, with 45% of houses on the average estate having historic tenancies with poor rent levels. Active management of a residential portfolio can release properties to be let out at market rents.

    Changes in planning legislation have also made alternative uses more feasible. “There is now greater scope for converting disused farm buildings into residential or commercial use,” explains Alex Lawson.

    Investing in forestry

    Along with development, there are other areas of potential growth worth exploring. Charles Dudgeon of Savills Rural Agency believes forestry is an important sector to consider. “Timber prices are already rising and forestry carries certain tax advantages,” he explains. “Any estate that is big enough should have some commercial forestry. If you don’t have any nearby, consider buying out of your area.”

    Download Aspects of Land free of charge and read the full report to see how renewable energy or water management can be good investment options for farms or estates.

     
    Philip Gready

    Philip Gready

    Executive Director
    Rural, Energy & Projects Division

    +44 (0) 20 7499 8644

    +44 (0) 20 7499 8644

    Contact
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    Savills Margaret Street
    33 Margaret Street
    London
    W1G 0JD

     
     
    Andrew Wraith

    Andrew Wraith

    Director
    Food & Farming

    +44 (0) 1522 508 973

    +44 (0) 1522 508 973

    Contact
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    Savills Lincoln
    Olympic House
    Doddington Road
    Lincoln
    Lincolnshire
    LN6 3SE

     
     
    Clive Beer

    Clive Beer

    Head of Professional Services
    Rural

    +44 (0) 20 7877 4724

    +44 (0) 20 7877 4724

    Contact
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    Savills Margaret Street
    33 Margaret Street
    London
    W1G 0JD

     
     
    Charles Dudgeon FRICS

    Charles Dudgeon FRICS

    Director
    Rural Sales

    +44 (0) 131 247 3702

    +44 (0) 131 247 3702

    Contact
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    Savills Edinburgh
    Wemyss House
    8 Wemyss Place
    Edinburgh
    Midlothian
    EH3 6DH

     
     
    Mark Egar FRICS, FAAV

    Mark Egar FRICS, FAAV

    Director
    Estate Management

    +44 (0) 1462 813 209

    +44 (0) 1462 813 209

    Contact
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    Savills Southill
    The Estate Office
    Southill Park
    Biggleswade
    Bedfordshire
    SG18 9LJ

     
     
     

    Key contacts

    Alex Lawson

    Alex Lawson

    Director
    National Farms and Estates

    Savills Margaret Street

    +44 (0) 20 7409 8882

    +44 (0) 20 7409 8882

     

    Charles Dudgeon FRICS

    Charles Dudgeon FRICS

    Director
    Rural Sales

    Savills Edinburgh

    +44 (0) 131 247 3702

    +44 (0) 131 247 3702

     
     

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