This was first highlighted in 2012, when average settlements for all Agricultural Holdings Act (AHA) rent reviews peaked at 22% and at 36% for Farm Business Tenancies (FBT) in October of that year.
This trend is unsurprising given the current pressure on farm incomes despite falling costs for key inputs including fertiliser and fuel.
Settled rent reviews for existing tenancies on over 112,000 acres in the year to 31 October 2015 were analysed with average FBT rents rising by 22% compared to 16% for AHA tenancies. Sector analysis shows the livestock sector average rental increases performed well for both tenancy types, however as illustrated in the graph, there is a wide range in the distribution of rental increases.
Rents for new FBTs
There are increasingly more occasions when rents agreed are below those reported in the press, which reflects the diversity in the types of holding and the land offered. Many landlords are now reviewing the business plan, skills and husbandry objectives as part of the application process, and are not always taking the highest offer.
Guy Streeter from Savills Petworth, comments: “Clients are increasingly looking to create long term relationships with tenants in order to develop sustainable agricultural practices.”
In the year to 31 October 2015, Savills was involved in the letting of over 12,200 acres on new FBTs; the average holding was 104 acres, just 13% of the lettings were over 200 acres and there were 18 equipped farms. There was considerable variation around the rental average. Arable farm FBTs averaged £126 per acre, but over 16% of arable farm rents were over £200 per acre, and mostly in the east.
Demand remains strong for quality land and equipped holdings, especially from farmers looking to spread costs over a bigger local acreage. It is clear bidders for FBT land are being more realistic and paying more attention to budgeted costings then perhaps previously.
Some producers, especially if facilities require considerable investment are choosing to cease production, but there is still a good demand for well-equipped holdings and rents for FBTs remain strong where producers see an opportunity to expand.
Beef and sheep
We expect reasonable demand for productive lowland units but there will be inevitable downward pressure on rents linked to extensive / environmental grazing lettings, where stocking rates are restricted.
Pictured: Distribution of AHA and FBT rent review results in year to 31 October 2016