A Year in Land
The Land Group closed it’s most successful year since inception, selling over 4,500 acres across Delmarva. The story however, is truly quite simple, We Sell Dirt. These three words have helped us develop a focused approach to commercial real estate. While we are not commercial brokers in the traditional sense, our box is not easy to define and we only really fit in the box of “land guys”. Only every once in while we sell something with walls.
In 2016, we expanded the Land Group footprint to include Delaware, Maryland and the great state of Virginia. This gives us a expansive outlook on our little Island called the Delmarva.
This is the third year of drafting this report and each year it evolves but the principle behind it remains the same. We have come to learn the value of land is often rather complicated, even while it seems one farmland acre is the same as the next. The purpose of this report is to provide insight on land transfers with the filter being our market knowledge of specific trades, the actors involved in the trades and often times a background of understanding to the motivations in the transaction. Our analysis is not the same as the appraisal process, as that practice is conducted within strict parameters required by the appraisal industry and banking industry. Our viewpoint is more of a practitioner’s perspective, thus giving us the ability to actively inform land buyer’s and sellers about land value and the economics of what differentiates land transactions from one another.
Going forward in 2017, we are watching how the changing political landscape will influence high net worth individuals to invest as the stock market climbs. We expect to see some investment turn to land and possibly luxury waterfront farms as some recent trades have indicated a growing interest in this sector of the land market. Most of these investments tend to be cash funded and therefore interest rates on debt will play little role in a luxury farm purchase. These buyers in the marketplace will put additional pressure on cost of quality tillable inland farms, and local agricultural producers will find additional competition in vying for quality tillable farms.
Impending regulations on agriculture is worthy of attention and farm groups remain on point as federal and state regulators continue to push for increased water quality measures. These regulatory measures may create undue pressure on farm profits in a time when input costs and commodity prices for producers could create instability for local and regional farm economies.
A heated debate is underway regarding land use for solar farms in the region. In Maryland, several counties have put temporary limits on land allocated to solar farms while the debate on the size of utility scale solar projects are considered. The mandates established at the federal and state level are not without limits. Solar industry experts have determined approximately 5,300 acres can be encompassed in solar ground mounted projects in Maryland. The reality of the mandated need being fully allocated to ground mount solar is unlikely as it could also be deployed to roof tops throughout the state. Yet, the number of lease option agreements put in place on land in Maryland has raised concerns within the agricultural community as this shotgun approach to creating these projects has created an appearance of a solar industry with an endless appetite for land on the Delmarva.
Agriculture is the largest industry on the Delmarva. In 2015, Maryland alone generated over $3 Billion in gross receipts and cash income through more than 2.2 million acres of land dedicated to agriculture.
It is critical to encourage good land use decisions when it comes to the most important industry to the region. It is debatable however, as to the extent of the threat a change in land use of 2% of the agricultural lands will have on the industry. It is the perception however of how big the solar industry could become which fuels the concerns in the community.
This island we call the Delmarva Peninsula is a unique place fully deserving of careful management and thoughtful decisions as to how we utilize the resources and assets it gives us. The Land Group will do our part to support the discussion with information and the perspective we can provide as guys that just sell dirt.
We are looking forward to a dynamic land market in 2017. Be well and make it a great year. Onward!