Diverse range of values achieved for farm business tenancies in the UK

Farm business tenancy rents in the UK are becoming increasingly diverse in terms of the range of values achieved according to Savills farm rental database which includes 600 tenancies across 264,000 acres.

While 55% of rents during 2012 were at least £90 per acre compared with just 32% in 2008, some 61% of arable rents, including potato and vegetable land, were over £100 per acre and there was a huge range in values with some achieving over £500 per acre.

Savills says that growers are often now looking at factors including proximity to their core holding and the quality of drainage when offering on a farm business tenancy in reaction to the high cost of inputs, commodity price volatility and the disastrous recent weather conditions.

‘In this context we do not expect settled rents for 2013 to reflect the 12 month average increases recorded for settled rents during 2012 of 33%. The average acreage in a tenancy during 2012 was 150 acres with 75% being 200 acres or less and 5% at over 500 acres,’ the firm adds.

The most popular length of tenancy was five years, accounting for 23% of tenancies, with two and 10 years each accounting for 17% of all other length of term respectively. There appears to be little correlation between the length of term and the acreage included.

‘There is a growing appetite for taking on extra farmland on a farm business tenancy as opposed to a contract farming arrangement,’ said Johnny Dudgeon director of Savills rural estate management.

‘Threats to yields and commodity price volatility are pushing the balance of growers towards farm business tenancies where the perceived risk is less, although this needs to be balanced with the taxation consequences of this route,’ he explained.

‘If current market conditions continue I suspect we shall see more farm business tenancies  agreed on a three to five year term with shorter time periods between reviews and break clauses,’ he added.