From The Land
By: Ben Alder
Mark Twain (born Samuel Langhorne Clemens, 1835-1910) once said “Buy land, they’re not making it anymore.” More than 200 years later this fact remains true. The most interesting part is today it seems to no longer be a secret. The demand for recreational land, agricultural and timberland alike is greater than I have seen in my nearly 20 years in the land industry.
Since the 1990s, U.S. farmland has provided consistent returns to landowners of more than 11% annualized. See the table below where the data shows exceptional resilience compared to other asset classes.
Land has many attributes which give it intrinsic value to our daily lives, aesthetics, and livelihoods. Much has been said and written as to the importance of land and our dependence on it. Today this remains true and our role in stewarding and conserving the land is clearly more important than ever.
While broadly and generally, land use in the region seems to be under constant strain, I am unable to discern the exact trajectory of land use in the Chesapeake Bay region. I do believe the balance between “change in land use” versus “lands conserved” is not easily measured. I remain confident in stating for an organization that transfers nearly 10,000 acres of land or more each year, land use change is “measured” except in certain areas slated for growth around local municipalities. It is important to note that each time a farm or timber tract is considered for transitional use, it is done so with a “forever mindset” and all our long-term needs for our Chesapeake community are considered.
In the past year, I have witnessed several trends in land use and land value. Some of these trends are both local and national. In either case, each has a bearing on land use and the economics of the region.
1. The Delmarva Land Market. A recent study completed by The Land Group of 11 counties on the Delmarva concluded the land market between June of 2020 through June of 2022 was a highly dynamic time period with the velocity of more than 617 land transactions occurring for properties over 25 acres. In these 617 transactions more than 46,549 acres were transferred for a gross sales amount of $654M. This study was conducted using only multiple list data. The Land Group has regularly documented the land market during the annual data analysis to be nearly twice this size on average each year. Nearly half of all land transactions occur through off market sales without a public offering. This fact is consistent with The Land Group’s collective experience as landowners often prefer private offerings of their land versus a public sales process.
2. Agricultural Production Land. Quality farmland is the most coveted silo of the land market and also the most valuable. This fact underpins the economic stability and the quality of life on Delmarva. High quality farmland, especially if irrigated, will bring multiple buyers and land values of $7k to $20k across the region.
3. Timber Markets. There is a renewed interest in the Forest Products Industry. This is in part due to the efforts of the Maryland Forest Association and its associated partners. Several investments made by clients working through TLG were land investments for timberland resources. Carbon sequestration projects will likely add additional complexity to local timber prices at the stump in the landowners favor perhaps. A significant investment on a national level made in the carbon sequestration space will bring Maryland, Virginia, and West Virginia into the global market for carbon trading.
4. Farm-Steading. Families and retirees alike are setting up small farms to produce farm-made products. These farms drive the cooperative farmers markets and the whole food movement. Quality vegetable land remains in high demand. These farms add capacity to local food networks, as well as create agricultural related jobs.
5. Solar Industry. Solar projects in the region are evolving from large-scale industrial projects riddled with permitting difficulties and public opinion to community solar projects established to support local energy needs. Local planning and zoning commissions continue to work to have practical public policy to shape this land use.
6. Poultry Industry. Poultry farming is experiencing intense interest for existing farms in production to purchase and operate. Even in the current interest rate environment, demand for these farms remains high and regional integrators
7. Recreational Land Buyers. Land buyers in this space continue to drive the land market. They remain focused on wildlife, aesthetics, privacy and getting away from the urban spaces. Hunting properties for upland game such as Sika Whitetail Deer and Eastern Turkey are extremely sought after. Recent transactions are driving land values well over $10,000 an acre for quality hunting land with a history of sound wildlife management. Waterfowl properties are more elusive to find but when they are identified, buyers are quick to move and pay asking prices in the $10,000 to $20,000 per acre range based on the improvements and amount of floodable land established and managed on the farm.
8. Land Buyer Appetite. The last two years have taught us once again what a “hot” or robust market looks like. While many have capitalized on the sell side of the equation, buyers’ appetites remain strong. The bottom line is, land buyers and investors remain bullish in todays’ current land market. In the region we have documented and conducted land sales on farmland with no development speculation which exceeded $12,000.00 an acre.
9. Ag Economics. A broad brush of ag economics in our region reinforces the principle of farmland consolidation for the purposes of scale and operational profitability. This is perfectly illustrated in the appetite and competitiveness within the industry to grow larger. Today is one of the lowest levels of farmland available in a marketplace witnessed over the last twenty years.
10. This space is being left blank on purpose! No list is complete unless it is a true Top 10. But, as Mr. Twain told us, it is clearly a smart investment to buy dirt. Fortunately for The Land Group, We Sell Dirt™ has become a well-balanced business plan and a logo that drives a lot of conversation walking through an airport!
2022 has been a great year at The Land Group. We have been blessed with outstanding clients, a great team of land professionals and one of the most dynamic and beautiful landscapes on which to work!
Looking forward to 2023 and seeing you in the field.