Market Intelligence Report
Agricultural Rent Survey Year to 31 October 2013 Rents rise by 29%
smithsgore.co.uk
Rents rise by an aver age of 29% Rents for all tenancy types rose by an average of 29% for reviews and new lettings in the year ending 31 October 2013.
Key points
Rents for existing tenancies rose by 24% at review, compared with 25% for the year ending 31 October 2012.
• • •
Rents for new Farm Business Tenancies, with ‘new’ tenants and new tenancies with existing tenants, rose by 57% compared with the previous rent; it was 59% for the year ending 31 October 2012.
Average percentage change in year to 31 October (all farm and tenancy types) Includes both reviews and new lettings
Rents continue to increase due to the competitiveness of the market: there is strong demand from farmers due to underlying profitability and relatively few rental opportunities. This is despite the challenging autumn and winter conditions. The average FBT rents in this report are well below some of the rents that grab the headlines. This reflects the diversity of holdings and land, and that many landlords consider other factors than the highest rent when selecting tenants, such as supporting existing tenants.
Arable FBT rents are the highest, both in terms of % increase and in £/acre Rents for higher quality soil continue to increase most Scottish rents have increased at their fastest rate since 2009
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
2011 AHA
2012 FBT
Rupert Clark Head of Rural Practice Petworth office t 01798 345999 e rupert.clark @smithsgore.co.uk
2013 Scottish Tenancies
2010 - 2013 Overall average
Simon Blandford Head of Farm Management Winchester office t 01962 857405 e simon.blandford @smithsgore.co.uk
Rents for existing tenancies
Growth by Farm Type 2013 Highest rises in the livestock sector
2010 - 20131 24% increase on aver age
Rents increased by an average of 24% which is slightly lower than the 25% average for reviews conducted in 2012, but consistent with the three-year average of 24% between 2010 and 2013.
All sectors have experienced increases, with the largest being in the arable sector, and the lowest for mixed and dairy farms.
Arable and livestock rents continue to increase the most. Livestock rents rose by 29%, up from 26% in 2012; arable rents rose by 27% down from 33%.
For the average sized farm in the database, this has meant an increase in rent of £4,000 a year – so £12,000 over a three-year rent review cycle.
These figures are averages and, as stated before, there is considerable variation around the averages, as illustrated by the graph at the end of the existing tenancies section.
Rent review results by farm type in year to October 2013
Arable
Rent review results by farm type 2010 – 2013
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
£98
£77
27%
106
19,084
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£94
£73
29%
427
104,778
Dairy
£78
£69
14%
56
10,969
Dairy
£81
£70
16%
148
34,427
Livestock
£56
£45
29%
176
68,202
Livestock
£55
£45
26%
463
181,900
Mixed
£81
£68
20%
145
29,679
Mixed
£78
£66
19%
434
97,663
127,934
Overall average
£76
£62
24%
1,472
418,769
Overall average
£75
£62
24%
483
1
“2010 – 2013” and “last three years” relates to the period between 1 November 2010 and 31 October 2013.
Rents for existing tenancies
Growth by Tenancy Type 2013 FBTs continue to show greatest rises FBT2 rents rose by 32% compared with 21% for AHA and 16% for Scottish tenancies. This is because rent review clauses in FBTs allow rents to be revised to current open market levels while AHA and many Scottish tenancies have a less open market nature. The 16% average increase for Scottish tenancies is the highest since 2009, when the figure was also 16%.
Rent review results by tenancy type in year to October 2013
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
£160
Arable
£84
£70
21%
66
11,837
£140
Dairy
£82
£71
14%
39
7,004
Livestock
£49
£41
32%
65
32,118
Mixed
£82
£72
16%
92
18,395
£100
AHA average
£75
£64
21%
262
69,353
£80
Arable
£131
£94
38%
35
5,381
Dairy
£99
£85
19%
9
1,571
£60
Livestock
£81
£63
31%
71
9,191
£40
Mixed
£95
£73
33%
35
5,471
FBT average
£97
£74
32%
150
21,614
Arable
£57
£50
15%
5
1,867
Dairy
£39
£37
4%
8
2,394
Livestock
£22
£19
19%
40
26,894
Mixed
£45
£39
16%
18
5,813
Scottish average
£32
£28
16%
71
36,967
Overall average
£75
£62
24%
483
127,934
NB This data only includes rent reviews and excludes ‘new’ FBTs, which are covered in the Rents For New Farm Business Tenancies section.
2
£120
Old rent (£/acre)
New rent (£/acre)
Overall
Mixed
Livestock
Dairy
Arable
FBT Average
Scottish Tenancies
Scottish average
FBT
Mixed
Livestock
Dairy
Arable
AHA Average
AHA
Mixed
Livestock
£0
Dairy
£20
Arable
Scottish tenancies
FBT
AHA
Rent review results by tenancy type in year to October 2013
All
Rents for existing tenancies
2010 - 2013 Growth lowest in dairy sector FBT rents increased by 33%, compared with 21% for AHAs and 15% for Scottish tenancies. For both FBTs and AHAs, livestock rents have increased particularly strongly in percentage terms. For arable rents, the rate of increase for FBT rents has been more than double that for AHA lettings. Dairy rents have risen less than other farm types, which is expected given the tight margins and long-term economic challenges faced by the sector. Rent review results by tenancy type 2010 - 2013
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
£160
Arable
£82
£68
22%
274
76,131
£140
£62
21%
833
241,657
£123
£84
46%
136
24,580
Dairy
£95
£81
18%
40
8,233
Livestock
£78
£62
31%
161
24,576
Mixed
£93
£76
25%
114
19,888
FBT average
£97
£74
33%
451
77,277
Arable
£66
£58
13%
17
4,067
Dairy
£45
£43
6%
16
4,727
Livestock3
£24
£21
16%
115
78,260
Mixed
£44
£38
15%
39
12,757
Scottish average
£34
£30
15%
187
99,811
Overall average
£76
£62
24%
1,471
418,745
One reason Scottish livestock rents per acre are lower than in England is because the average farm size is much larger in Scotland.
3
£80 £60 £40 £20 £0
AHA
FBT
Old rent (£/acre)
Scottish Tenancies
New rent (£/acre)
Overall
£74
Arable
Scottish average
AHA average
£100
Mixed
65,017
Livestock
281
Dairy
17%
Arable
£66
FBT Average
£76
Mixed
Mixed
£120
Livestock
79,040
Dairy
21,468
186
Arable
92
29%
AHA Average
17%
£45
Mixed
£70
£55
Livestock
£81
Dairy
Dairy Livestock
Arable
Scottish Tenancies
FBT
AHA
Rent review results by tenancy type 2010 - 2013
All
Rents for existing tenancies
Growth by Region and Farm Type 2013 East Midlands and Yorkshire rents rise 33%
Old rent (£/acre)
Percentage change
Arable
£93
£77
22%
13
2,695
Dairy
£87
£74
18%
30
4,845
Livestock
£56
£48
26%
70
37,735
Mixed
£72
£66
10%
24
5,271
Region average
Number of reviews
£69
£59
21%
137
50,546
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£100
£77
27%
28
3,613
Dairy
£82
£74
11%
18
3,730
Livestock
£88
£66
36%
46
3,000
Mixed
£90
£78
18%
70
7,666
Region average
£90
£74
24%
162
New rent (£/acre)
Old rent (£/acre)
Percentage change
Arable
£57
£50
15%
5
1,867
Dairy
£39
£37
4%
8
2,394
Livestock
£22
£19
19%
40
26,894
Mixed
£45
£39
16%
18
5,813
Region Average
£32
£28
16%
71
36,967
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£82
£65
27%
22
4,954
Dairy
n/a
n/a
n/a
n/a
n/a
Livestock
£51
£39
53%
11
138
Mixed
£78
£61
29%
23
7,745
Region average
£74
£58
33%
56
12,837
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£114
£87
29%
38
5,956
Dairy
n/a
n/a
n/a
n/a
n/a
Livestock
£45
£37
21%
9
435
Mixed
£106
£74
49%
10
3,185
Region average
£101
£77
31%
57
9,577
Area reviewed (ac)
18,007
N/a means either no or too few reviews carried out to show reliable data. NB These figures are based on all rent reviews and so include a range of tenancy types.
East Midlands and Yorkshire
New rent (£/acre)
Smiths Gore offices
Eastern England
Western England and Wales
Northern England
Scotland
Rents have risen in all regions and as in 2012, the highest rises continue to be in East Midlands and Yorkshire and Eastern England. Surprisingly, whilst arable rental growth in these areas has been strong, livestock rents are often increasing faster in percentage terms.
Number of reviews
Area reviewed (ac)
Rents for existing tenancies
Scotland
2010 - 2013 Eastern England has had largest rises
Percentage change
Number of reviews
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£66
£58
Dairy
£45
£43
13%
17
4,067
6%
16
Livestock
£24
4,727
£21
16%
115
78,260
Mixed Region Average
£44
£38
15%
39
12,757
£34
£30
15%
187
99,811
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£85
£66
29%
112
25,801
Dairy
£86
£74
16%
7
1,607
Livestock
£54
£40
54%
30
4,735
Mixed
£80
£67
21%
71
19,784
Region Average
£79
£63
29%
220
51,928
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Area reviewed (ac)
Arable
£84
£70
20%
48
11,326
Dairy
£81
£70
17%
62
12,355
Livestock
£57
£48
25%
169
86,147
Mixed
£73
£65
14%
46
11,700
Region Average
£68
£58
21%
325
121,528
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Arable
£89
£67
31%
89
18,666
Dairy
£90
£77
18%
54
12,239
Livestock
£81
£64
30%
124
9,650
Mixed
£80
£70
16%
219
28,668
Region Average
£83
£69
23%
486
69,223
East Midlands and Yorkshire
Old rent (£/acre)
Smiths Gore offices
Eastern England
Western England and Wales
Northern England
New rent (£/acre)
New rent (£/acre)
Arable
£110
£82
34%
161
44,919
Dairy
£86
£72
20%
9
3,499
Livestock
£59
£47
27%
25
3,108
Mixed
£90
£68
35%
59
24,753
Region Average
£99
£75
33%
254
76,279
Rents for existing tenancies
2010 - 2013 The effect of houses and farm buildings Equipped AHA holdings with houses and buildings continue to have higher rents than bare land lettings5.
Rents for equipped holdings are affected by the quality and quantity of buildings available. Tenants will pay more for better buildings and equipment.
There is very little difference in FBT rents being paid for bare or equipped land. We think this is because the buildings and equipment being offered frequently do not suit the tenants’ needs. Rent review results by tenancy type and equipped 2010 - 2013 New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Well equipped
£70
£59
20%
209
103,008
Averagely equipped
£76
£63
20%
482
190,417
Poorly equipped
£68
£55
23%
193
73,708
Overall average
£73
£61
20%
884
367,133
£140 £120
New rent (£/acre)
£100
£80
The effect of land quality – premium rents for premium land
£60
Not only is the rental value of better quality land higher, rents for Grade 1 and Grade 2 land have risen by the greatest percentage over the last three years. Average Grade 1 rents are now 64% higher than Grade 3, compared with 46% before these reviews were undertaken.
£40 £20
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of reviews
Area reviewed (ac)
Grade 1
£133
£98
37%
28
10,704
Grade 2
£97
£74
29%
155
44,831
Grade 3
£81
£67
23%
1,017
199,764
Grade 4
£46
£38
22%
201
86,227
Grade 5
£13
£11
22%
70
77,139
Overall average
£76
£62
24%
1,471
418,666
£0 Bare AHA Arable
Equipped AHA Dairy
Bare FBT Livestock
Mixed
Equipped FBT Overall average
There is one exception to this which is livestock farms, where extensive equipped holdings mean the average equipped rent is lower.
5
Rents for existing tenancies
Distribution of AHA rent review results 2013 Each point on this graph shows an actual rent agreed. If you look at ‘25%’, this is the point at which 25% of rents are lower and 75% are higher; for arable farms this is £70 per acre. Variation is greatest amongst livestock rents as both very low and high quality land can be used for livestock farming.
Distribution of AHA rents agreed in year to October 2013 100% 100%
Lowest to highest rent Lowest to highest rent (excluding the top and bottom 5%) (excluding the top and bottom 5%)
Top 25% of rents
75% 75%
50% 50%
25% 25%
0% 0%
£0 £0
£20 £20
£40 £40 Arable Arable
£60 £60 New rent (£/acre) Dairy Livestock Dairy Livestock Mixed
New rent (£/acre)
£80 £80
£100 £100 Mixed
£120 £120
Rents for new Farm Business Tenancies6
2013 Strong rental uplift for all farm types
2010-2013
We let over 9,000 acres on new FBTs in the year to 31 October 2013.
Rents have risen by 60% on average in the three years to 31 October 2013.
The average letting size was 109 acres. The arable lettings averaged 138 acres, whilst livestock lettings averaged 66 acres, and mixed lettings averaged 125 acres. 16% of the lettings were over 200 acres and there were 11 equipped farms let.
Livestock rents are lowest per acre, but have recorded the highest percentage increase during the last year and three years.
Rents for new FBTs are 57% higher on average than they were under the previous letting of the holding.
Rents have risen most in the East Midlands and Yorkshire. Average rents for new lettings are highest in Eastern England.
New FBT rents have risen in all regions.
There is considerable variation around the averages. For example, arable FBTs averaged £160 per acre in the year to 31 October 2013, whilst the top 10% of arable rents were over £230 per acre. New tenancies – FBT rents agreed by farm type in year to October 2013 New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of lettings
Area let (ac)
Arable
£160
£114
49%
38
5,255
Arable
Livestock
£88
£53
72%
27
1,792
Livestock
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of lettings
Area let (ac)
£139
£93
47%
130
17,833
£91
£55
76%
79
7,364
Mixed
£104
£67
58%
17
2,131
Mixed
£103
£70
65%
42
6,448
Overall average
£125
£81
59%
82
9,177
Overall average
£118
£77
60%
251
31,644
New tenancies – FBT rents agreed by region in year to October 2013
6
New tenancies – FBT rents agreed by farm type 2010 - 2013
New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of lettings
Area let (ac)
East Midlands and Yorkshire
£127
£65
97%
19
1,978
New tenancies – FBT rents agreed by region 2010 - 2013 New rent (£/acre)
Old rent (£/acre)
Percentage change
Number of lettings
Area let (ac)
East Midlands and Yorkshire
£123
£74
69%
60
5,390
Eastern England
£153
£106
54%
19
2,269
Eastern England
£134
£91
54%
70
11,463
Northern England
£79
£60
35%
14
1,718
Northern England
£96
£68
56%
53
7,679
Western England & Wales
£123
£83
52%
33
3,334
Western England & Wales
£114
£76
59%
72
7,548
Overall average
£124
£81
57%
85
9,299
Overall average
£118
£77
60%
255
32,081
There were not enough new Scottish tenancies to produce robust data, so analysis focuses on FBTs.
Our experience over the past year English & Welsh view
Scottish view
Rents reflect success of tenant businesses
Steady as she goes?
The rental market in England and Wales continues its bull run, with increases in 2013 matching those seen in 2012. As we have reported before, the momentum behind the continued increases points to the strong competition for land, underpinned by the confidence and strength of many tenant farming businesses seeking to grow profits by expanding their operations and spreading fixed costs. Whilst there will always be difficult cases which need sensitive handling, the growth in rents is a positive indicator of a sector in good health.
A surprising heading perhaps given all that is going on.
The increases are universal, although with some variations between the different sectors. It’s notable that dairy rents have increased by less than the other farm types, but the improvement in output prices and stabilisation of costs during the year has boosted confidence and this sector might be expected to perform better in the first half of 2014. The two-tier market between AHA and FBT rents has become even more pronounced, with new FBT rents increasing 1 ½ times faster than AHAs at rent review and almost 3 times faster in new lettings. One wonders how this growing divide between open market and regulated market can be sustained in the longer term. Rents for new FBTs have increased by an average of 57%, with 1 in 5 rents being agreed at over £200/acre. For rent reviews in continuing FBTs the average increase has been just 32%, with only 1 in 30 above £200/acre. These statistics appear to bear out the experience of our estate managers on the ground: land which is offered to let under a new tenancy, whether on the open market or among existing estate tenants, attracts high levels of interest and bids from thrusting prospective tenants. The dynamic is different in a continuing tenancy at rent review, where the parties are having a constructive, informed dialogue and agreeing rents which, whilst increasing significantly, are well below the very top of the market. We think that this is at least partly explained by the value both parties place on a sustainable and continuing working relationship. Whilst landlords will be acutely aware that some farms have been terribly affected by ongoing flooding, the signs are that rents in most areas will continue their upward path in 2014. It seems inevitable that the rate of rent increases must slow down at some point, but there is no sign of the demand for land receding just yet.
Stephen Spencer Partner Lichfield office t 01543 266403 e stephen.spencer @smithsgore.co.uk
Another successful round of rent reviews has been completed by our teams across Scotland. The backcloth to these reviews is perhaps more cautious than previously, which reflects continuing downward pressure on grain prices and a general mood of caution in the livestock sector built on the lingering impact on costs caused by the very wet weather in 2012. This mood however could, you feel, easily change once again to being more upbeat if the early spring sunshine continues in Scotland through to a ‘normal summer’. The dairy sector however continues to find an economic existence difficult and the below inflation increase continues to reflect this. It is difficult to see where meaningful change is going to come from for dairy farmers at present. There are a number of significant influences at play in the sector. It is clear to us that our clients are very aware of both the positive and the negative aspects of Scottish agriculture – its strengths and weaknesses in terms of production and profitability. The interesting thing as you go round farms is to witness how different farming businesses are responding to the challenges of making ends meet. Everyone involved in Scottish agriculture is also all too aware of the seemingly never ending discussions and consultations about the tenanted sector. The failure to settle this debate not only dissipates valuable time and resources and adds to uncertainty but, most importantly, it reduces the options available to those in the industry who want to add to or change their farming businesses by renting more land. Scottish agriculture needs this issue settled. Farmers are also concerned to understand what the new agricultural support regime will actually mean for them. NFUS has worked hard to inform and guide; clarity is now not too far off. And finally we have the independence vote. Restricted options to access land, the nature and value of farm support and our political future – issues don’t really get much bigger than that. ‘Steady as she goes’ seems like a good place to be just at present.
Toby Metcalfe Partner Edinburgh office t 0131 344 0885 e toby.metcalfe @smithsgore.co.uk
The Outlook for 2015 and 2016
About the agricultur al rent survey
Arable A return to last season’s strong commodity prices would be welcome but confidence in the sector remains high. Wheat cropping is likely to pass 5 million acres in the UK and is +2.5% globally. Early drilled crops are looking respectable with growers eager to get back on the land after the wet/mild winter in the hope of staving off looming disease threat. Strong demand for land is unlikely to be met through increased supply so rents at tender are likely to be as strong as last year.
Beef and sheep There remains promise in the market with household beef expenditure up 6.8% on the year despite some decrease in volume traded. Mild temperatures have led to continued grass growth in some areas, in others wet weather has meant a far tougher winter grazing period. Any supplementary feeding will push up the cost of production and squeeze margins. The welcome reduction in cereal costs may ease some of the pressures.
Dairy Prices are up on concentrates, forage and other bulk feeds, but we have also seen the feed wheat price dip by as much as a quarter on the previous year’s prices. A stronger milk price will deliver healthy margins for the efficient producer. Despite the improvements in dairy margins generally, the decline in producer numbers continues. Well equipped units continue to attract strong tenders in the market. Seasonal forage cropping land is attracting exceptionally high bids.
Please note that the rents shown are averages and that there can be considerable variation either side of the average depending on the location and quality of the holding and its fixed equipment. Some rents have dropped, usually when properties are taken out of the tenancy agreement, and others increased by well over 100%. This analysis focuses on what might therefore be described as trends.
Pigs and Poultry The cost of production has eased to reflect the reduction in feed input prices. UK producers still struggle to match EU costs of production but are fairing better than in previous years as consumer confidence in UK pork remains high. Poultry producers are also benefiting from easing feed prices and continue to work towards their 50% share of the UK poultry market with the sector beginning to generate new interest and investment.
Our surveyors use the database as a source of information when they are conducting reviews, and we carry out performance reviews for estates and portfolios against the database.
Simon Blandford Head of Farm Management Winchester office t 01962 857405 e simon.blandford @smithsgore.co.uk
This report provides details of average rents agreed at rent reviews, re-lettings and new lettings in: (i)
2013: the 12 months to 31 October 2013 (570 rent settlements covering 137,000 acres)
(ii)
2010 - 2013: the 36 months to 31 October 2013 (1,745 rent settlements covering 454,000 acres)
The complete database now contains details of over 3,000 rent settlements, covering over 825,000 acres of land in England, Scotland and Wales with a rent roll in excess of ÂŁ44 million per annum. It is one of the most comprehensive databases available in Great Britain. Average rents
How we use the database
Demand for farmland for rent remains very strong, due to competition between farmers seeking to expand and spread fixed costs. If you are a landowner, landlord, tenant or are looking to contract or share farm land, please contact our local team to discuss the options available to you. They can advise you on the best course of action to suit your circumstances. They will also have details of land in your area that is available to rent. Their contact details are at the end of this report.
Contacts If you would like to discuss rent reviews or options for letting land, please contact:
Scotland Toby Metcalfe t 0131 344 0885 e toby.metcalfe@smithsgore.co.uk
East Midlands and Yorkshire & Humber David Goodson t 01733 559306 e david.goodson@smithsgore.co.uk
North Philip Coles t 01325 370511 e philip.coles@smithsgore.co.uk
West Midlands and Wales Stephen Spencer t 01543 266403 e stephen.spencer@smithsgore.co.uk
South West Charles Dixon t 01392 294892 e charles.dixon@smithsgore.co.uk
South East and East of England Rupert Clark t 01798 345999 e rupert.clark@smithsgore.co.uk
To discuss the sale or purchase of agricultural land, please contact: Smiths Gore offices Giles Wordsworth National Head of Farm Agency t 01865 733302 e giles.wordsworth@smithsgore.co.uk
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