Looking Forward in 2020
Happy New Year! This has been an exciting year to say the least and I am proud to report we have opened our new office and The Land Group is the Chesapeake Bay Region’s only singularly focused land brokerage. Today, our footprint extends across 32,000 acres of land listings in four states. We now serve Maryland, Delaware, Virginia, and Pennsylvania. Please visit our website to preview our inventory and learn about the additional land consulting services we provide. Our consulting services assist landowners with conservation programs, land entitlements, GIS based land evaluation, and we regularly conduct highly targeted land searches for our clients. In 2019, we worked for 100’s of private landowners, as well as, a breadth of nationally based agribusinesses, both domestic and International solar developers, as well as, local and nationally focused non-governmental conservation organizations. We focus on bringing value to clients through understanding land value together with land use and how the two are intertwined. Below is the recent article I authored for the Delmarva Farmer with some takeaways from our Land Report and the state of land use in the region. Thanks for your time in reading. Be Well.
For Delmarva Farmer, January 2020
Thank you for the opportunity to share, but the reason the Delmarva Farmer invited me here was not to talk about ourselves. Each year we publish a Land Report focused on reporting data about land sales throughout the region. Aggregation of this data is a significant effort each year and we provide it for free throughout the year via our website at thelandgroup.us or we can mail you a hard copy as well. Send me an email at [email protected] with your request, name and mailing address. Via our Land Portal section on the website we provide running records showing a map and description of of the trade available for your review by county. We update the data typically on six month cycles. Enroll directly on our website and we will approve your access.
Back to the topic at hand, the most direct question I am asked is “How is the Land Market?”
With confidence we can answer this question. Each year however, I like to remind folks of how we define the land market and why our data is different from the traditional appraisal process.
We work to answer the question like you as a buyer look at the market and how you think in terms of land use. We distinguish value between land use cover and don’t blend numbers across those land types. This ultimately keeps us from having to make percentage adjustments in value analysis and keeps the discussion in terms of how a buyer considers the utility of the land type they are investing in. Additionally, it should be noted we do not evaluate land in our data sets which include significant improvements, as it is difficult to make proper value adjustments and remain objective.
This year we reviewed 275 land sales in ten counties, including new counties of Carroll, Baltimore and Charles. Several observations in the data are highlighted in Land Report provided on our website. Here are a few quick take home messages from the report.
First, velocity of sales are up overall both in farmland and timberland tracts from 139 to 275. This delta must be qualified as in previous years we by definition removed state and federal land sales from the data. After much internal debate it was decided to keep this sales data in all future sales data, as the state and federal land acquisition process follows rigid guidelines and in many cases set the marketplace benchmarks for landowners. In any case, the number of trades occurring even with our data adjustment demonstrates and increase in activity.
While velocity has increased, average price per acre of farmland and pastureland remains fairly consistent but with modest increases in most cases. On the Eastern Shore Sussex and Queen Annes Counties challenge the $7K an acre figure while the mid and lower shore counties all hover from $5500 to $6K an acre on average. Our new counties in Carroll and Baltimore show us the influence of land use change and the influence of urbanization to land value with $11,800 and $14,900 respectively per acre.
Worcester County and Dorchester County each enjoyed a dynamic market place this year in that Dorchester had over 20 trades of farmland up from 5 the previous period, while Worcester had several high farmland trades near the Berlin area which exceeded $7500 per acre for farmland.
Timberland sales represented 148 of the total sales analyzed in the data set. The highest values in timberland on the Eastern Shore were witnessed in Queen Annes County at $2916 per acre, where as, Dorchester and Sussex counties each balanced around $2100 per acre. In Delaware, we regularly sell smaller timberland tracts at $4K an acre for land that is not under a conservation easement and closer to the $2K an acre rate for land under conservation measures. The most difficult fact in timberland in our region is to recognize value of these timberland sales is influenced little by the value of the standing resource on the stump. The declining demand for timber resources on the Shore over the past 30 years has culminated in today’s low timberland values and asks the basic question. Is the Delmarva region ready for new investment in the timber resource industry? Stay tuned… our fingers are crossed.
Another question I am often asked is “who is buying land”. This is usually predicated around the concern that land use is changing. I can dispel that myth for you. Most of these trades are conveyed to new owners for the purposes of farming, hunting and outdoor recreation. The most threatened land is in Sussex County and the coastal bay region of Worcester County. Pockets of Wicomico County (Salisbury) and Talbot (Easton) face some development pressures, but only very small land tracts are being converted and typically they are close to or within the urban core. The long term vision of smart growth development and land planning in Maryland are well demonstrated around our towns on the Shore, while Western Shore counties have proven how valuable land becomes when faced with transitional land uses as in Howard County where land values can easily reach $50,000 an acre for residential development.
This leads to another “hot topic” in recent months that our farms are being covered with solar development. The data or the on the ground reality simply does not support that impression, but unfortunately there were and are so many contractual offers written by solar developers it left our community feeling that we were under attack by solar development. We have experience working in seven states consulting on solar development. 9 out of 10 projects will never be built and it might be 9.9 of every 10 will not be built. There is far less than 3500 acres of actual solar development built in Maryland today and a recent Wall Street Journal article suggested less than 250,000 acres are constructed in the entire US. There will be some additional land use change for solar in the Chesapeake Bay region, but it will not dominate our future and I believe the most critical point today is to ensure there are proper set back regulations and viewshed requirements. No one likes a chain link fence to look at. Frankly, I think chain link fences should be removed from a rural landscape or they should be rapidly encased in the vegetative cover. The easy conclusion here is to recognize on the Delmarva we have nearly 2.2M acres of cropland and a few thousand acres of land use change is going to hardly impact agriculture on the Peninsula.
My take away from the new data rests a favorite American author Mark Twain when he said “Buy land, they’re not making it anymore.” In fact, one land owner revealed to me how pleased they were in our sale this past summer when he explained the appreciation of his investment in the land I sold for him over was 400%. He turned right around and bought more land next to his home farm. Both history and current economic conditions point towards making part of your investment portfolio contain land investments. If you make your lively hood from land like agriculture your returns are potentially even greater. Although, I recognize the alternative outcome in bad growing seasons and the risk taken each year in agriculture. There is confidence in knowing at the minimum your land value will grow modestly and will never go to zero or negative. No other assets have this characteristic as land does. It’s never worth nothing.
In 2020, The Land Group has additional bandwidth in our people and geography to serve you but with the same focused direction on selling dirt. Give us a call, I will stop by the barn and chat… let us know how we can help. Look forward to working with you in 2020!