Trending in the Land Market
Greetings and Happy New Year!
2015 was an extremely active year in the Delmarva land market. Over 120 tracts totaling more than 13,040 of land were reviewed in six counties for years 2014 and 2015. In 2015 alone, the The Land Group worked to assist our clients in the purchase or sale of more than $17M in land transactions on nearly 3,750 acres in MD, DE, and VA. Additionally, the The Land Group consulted on a 9,000 acre transfer of commercial timberland in Virginia which transferred for $17M. 2016 is shaping up to be another banner year as the Land Group is excited to announce the addition of Doug Williams, a seasoned licensed land surveyor .
Clearly the team and the land market had a dynamic year. To ensure the best understanding of our market place, we review the data in two year segments as it is our experience that trends in the land market are better understood when looking at two years of data and works to minimize outlier transactions which may skew performance in the market. We are trying to figure out how to look two years ahead but identifying the data set for that analysis continues to be somewhat problematic.
The data is nicely summarized on the back page of the 2016 Land Report. From the data and our work in the marketplace, the Land Group has identified key trends and takeaways about the Delmarva land market.
The Wicomico County market snapshot written by Land Advisor Nick Campanaro summarizes this aspect of the marketplace and its velocity is consistent around the peninsula from Kent County, Delaware to Accomac County, Virginia. The poultry integrators are working to meet the demands of their market and this shortage of poultry housing is driving buyer’s to pay as much as 30 percent over agricultural land prices. It is likely this rapid land appreciation will be curbed over the next 24 months as the existing backlog of poultry housing is built. For now, this market sector for small land tracts 40 to 75 acres remains red hot.
Recreational and Conservation Land
This market sector has enjoyed a strong rebound as several large land tracts of conserved land (land in conservation easement) traded in recent months. This is highlighted via Land Group’s transfer of more than 500 acres of timber, uplands and tidal wetlands near Girdletree in 2015 for nearly $1M. In recent years these transactions were all but non-existent. Additional 100 to 300 acre tracts also transferred through our work this year in Caroline, Dorchester, and Wicomico Counties.
An interesting observation Land Group has uncovered in our transactions and data analysis is the shrinking delta in price difference between agricultural lands which are encumbered with conservation easements and those which are not encumbered. This analysis was conducted to assist local lenders and appraisers and our findings demonstrated that farmers seeking quality ag land will pay nearly the same price per acre regardless of the land’s encumbrance with a conservation easement. This fact is clear reflection of the land use policies put in place at the state level in 2009 to limit residential land subdivisions using well and septic and instead encouraging the use of municipal water and sewer infrastructure.
An important tax advantage for landowners was made a permanent part of the federal tax code in 2015, when Congress passed language which ensures landowner to receive tax benefits for protecting their land from development. The new law signed in December of 2015 will allow landowners to take up to a 50 percent deduction of their annual income in any one year and spread the deduction over 15 years at the federal tax level. This is both a significant accomplishment for the private landowner, but also for the preservation of our landscape.
While the true impacts of the land use change associated with medical marijuana have yet to be realized on the landscape, it is a trend to be revealed in 2016. More than 800 individual applications were submitted to the state to participate in the highly regulated business of growing and distributing medical marijuana. Principally the “buzz” with marijuana was focused on buildings which can be secured for indoor greenhouses, yet there was much speculation on outdoor growing facilities. Additionally, the Farm Bureau was engaged and decided not to endorse the requests of the coalition working to start this new legalized cash crop. The story on this budding business is yet to be told, so stay tuned.
Solar and Terrestrial Wind Projects
The wind behind wind development on the Delmarva Peninsula has blown out down to a light puff of air. The objections to terrestrial based winds run the gamut from aesthetics to loss of migratory birds due to birds entering the turbines. Our team worked on a number of properties slated for wind development but as the objections were better articulated they became louder and more organized among citizens from Somerset to Kent County. This has seemingly painted the future of renewable energy on the Delmarva to be one tied only to the sun.
Out of this discussion of wind energy, solar has emerged the clear winner. A number of projects are underway now around the Delmarva. The projects range from long term leases to fee simple purchase and each opportunity has its benefits based on the goal of the landowner. The Land Group is aware of purchases which exceed $9,000 per acre to lease rates north of $1000 acre/year. These values while generalized, offer a unique opportunity to land which due to the range of new zoning requirements have limited use outside of agriculture. It is our expectation that several solar farms will emerge in 2016 and additional projects will be planned on the heels of the recent renewal of tax credits and mandates for green energy at the federal and state levels.
2016 Delmarva Land Outlook
Downward pressure on grain prices has reduced the buying enthusiasm of local agricultural operations, but scalable farms continue to be buyer’s at farmland prices averaging $5,000 to $7000 per acre for quality tillable land in Maryland and Delaware’s lower six counties. Land with irrigation can realize $6,000 in Maryland and in Delaware irrigated land will bring purchasers to north of $8,000 an acre. Tillable land transactions will remain highly sought after as investment buyers have also entered the marketplace showing a strong appetite for farmland.
Other land uses like solar or medical Marijuana will be highly targeted and while higher prices will be dramatic to the market, the geography of these transactions will be limited.
For the near term it is expected that poultry will be a significant driver of land values and land use for small ag tracts and the Land Group is currently working on seven of these transactions to close in 2016.
Timberland and conserved lands is expected to be an area of growth for 2016 with the addition of Doug Williams to the The Land Group, and growing interest in this market sector as hunters continue to come back to the market. Our market share of these properties is significant as we can present more than 15,000 acres in Maryland and Delaware to the buyer’s which hire us to work to help them find the tract which meets their needs.
Have a great year and we look forward to working with you this year.