Should you sell or diversify your rural land?

According to recent research farmers remain the main buyer of agricultural land in the UK but the margin has narrowed significantly - the pandemic has driven a greater interest in rural land and property and agents are reporting a significant rise in instructions.

The Strategic Land Group saw a 180% increase in enquiries from landowners looking to sell land during 2020-21 - a trend which we expect to continue into 2022.

Land is more sought after than ever so there’s no better time for farmers to assess their estate and its value; underused land could support diversification and generate additional income. Sites with good access and located close to towns and villages are in particularly high demand and could command a high value from housebuilders, with the income from the sale then invested in diversification plans.

Diversification is likely to remain a major focus for farmers in 2022 - land is a major asset and will not only provide the space to facilitate new ventures, but could release capital to invest in new avenues.

Secure expert advice

Farmers interested in considering the options for their land - whether a sale or change of use - should get the experts on board as a first port of call. There are many agricultural land agents, but it’s always advisable to select someone with an established reputation and ideally who comes recommended. Their expertise will be invaluable in avoiding any pitfalls and will keep the process moving smoothly.

Look at the full picture

An early appraisal of the available land will ensure that you have the knowledge at hand to make an informed decision and allow you to assess all the options at your disposal.

Your advisors will play an important role in this process, but it is important to take a view of the estate as a whole and think carefully about your plans for each plot of land in the future. Removing an access point to one field, for example, could limit its use - and therefore its value - in the future.

Many farmers would concur that the use of their land naturally varies over time, changing in response to the needs of the business at that time. However, it’s important to have an eye on the future when making any big changes; make sure that easements and rights of way are mapped out carefully.

Make sure you’re clear on what you’ll be left with and rule out any potential issues in the future.

Divesting land

Land that fits the bill for housebuilders will increase in value significantly with planning permission in place - a land promoter like The Strategic Land Group will be able to manage the entire process for you and at their own cost. If planning permission isn’t secured, the land owner owes nothing. The land promoter will secure planning permission and then negotiate with developers to secure the highest value for the land - they will take a percentage of the final value so their interest is aligned with yours in securing the highest price.

While larger plots of land will naturally be more attractive to housebuilders, smaller sites can also be sold for new homes for an attractive return. The sale of smaller sites for development is often a good way to free up capital to invest back into the business without prejudicing the wider land and estate.

The self-build market is also a key target for smaller sites provided there is access to utilities and an access route for works.

Your advisors’ market knowledge will be invaluable in deriving maximum value for any land you wish to divest - they will be in the loop on any new infrastructure plans or major development in the area for which your site may be useful, thereby increasing the value of your land.

Biodiversity Net Gain

If your land is not considered suitable for homes, it may still be valuable to housebuilders to meet their biodiversity net gain requirements - any new development must result in an increase in biodiversity in comparison to pre-development. Often, doing this on the building site would make the project unviable so housebuilders will purchase sites elsewhere within the local area.

Divesting an underused site for this purpose not only frees up capital, but secures the site as a part of the area’s “green lung” for the lifetime of the development with no adverse effect on surrounding land.

Renewable Energy

As we try to reduce our reliance on fossil fuels, land is increasingly required for generating electricity in environmentally friendly ways. Large sites can be leased to solar farm operators for as much as £1,000 per acre per annum on a long-term lease. The land can usually still be used for grazing even once the solar panels are installed.

Smaller sites shouldn’t be ruled out either – they can often be used for battery storage to smooth out the peaks and troughs in electricity supply generated from wind and solar.

In both cases, it is crucial that planning permission is possible and a connection to the local electricity grid can be agreed. Renewable energy developers will often do this work for you, as will some land promotion companies, like The Strategic Land Group.

Draw on your networks and contacts

Be as open as possible about your plans for your business and for your land - many farmers are considering ways to generate additional income and there may be some way for you to work together.

Lockdown saw much more time being spent outdoors so the need for land grew considerably - we have seen farms hosting ‘winter welly walks’, land being used as secure dog fields and leisure operators setting up themed guided walks for children and other special seasonal outdoor activities.

Draw on farming networks to scope out potential opportunities - perhaps others have been approached by potential leisure operators which could be of interest to you, for example.

Keep an open mind

There is huge scope for diversification, with opportunities outside the traditional ‘farming’ remit but it’s important to keep an open mind and have the confidence to rely on your advisors - and your network - as a sounding board.

Whatever your strategy, whether that’s diversification or the sale of land, redevelopment and change of use of existing agricultural buildings, it’s vital to take early advice to prevent any costly mistakes, negative impact on the wider business and ensure that you are maximising the value of your land.

Paul Smith, Managing Director, The Strategic Land Group