Written by Jim Gillespie [June 14, 2011 / realestatesalescoach.com ]
It’s not easy finding sectors within the commercial real estate arena where solid appreciation has been happening. Businesses are having a tough time staying in business, consumers are having a tough time just paying their bills, and this all leads to a commercial real estate market with downward pressure on property values.
So with this in mind, why are the prices of farms and agricultural land rising, and why are some very serious and significant investors buying these properties worldwide? The reason for this is they’re seeing the huge demand coming that the average commercial real estate investor isn’t seeing right now.
Rising energy prices have been causing the price of food to skyrocket. Just look at your grocery bill whenever you check out at the supermarket counter these days. But why is the cost of food rising so much? It’s primarily due to energy. The rising cost of energy is what’s causing the price of food to skyrocket out of control.
This is because there are approximately 10 calories of hydrocarbon energy needed to grow, cultivate, process, package, and deliver every one calorie of food to your doorstep at home, before you even cook or refrigerate the food once it arrives there. So when the price of energy is rising, the price of food will be rising also. Those 10 calories of energy that go into creating every one calorie of food, just keep getting more and more expensive. You can click here to see the direct correlation between the price of energy and the price of food within this accompanying graph.
In addition, when you read this article that was recently published by Bloomberg, mentioning that the United Nations just published a report stating that “global food production needs to increase 70% to meet food demand by the middle of the century”, you begin to understand more about all of the underlying dynamics. More agricultural land will be needed to meet the world’s food demands, so the demand for agricultural land will be rising.
There’s another factor involved here also that you may or may not know about. The soil of a lot of farm and agricultural land has become depleted within recent decades, due to the constant demands of growing as much food as possible on every acre. So the yield of food per acre is expected to decrease within the coming years, meaning that again, more agricultural land will be needed to meet the world’s demand for food.
So what does this all mean? It means that some of the savviest investors in the world are jumping all over this opportunity right now, and buying farms and agricultural land in anticipation of what’s coming. This article mentions that on a global basis, entities buying agricultural land include hedge funds, funds with links to J.P. Morgan and Goldman Sachs, one company managed by a former U.S. Ambassador, and other major companies from around the world.
In addition, the article mentions that farmland in Iowa that sold for just $6,000.00 an acre just a few years ago, has recently sold for as much as $11,000.00 an acre. What other types of commercial property are you seeing that kind of appreciation in these days? In addition, this article will give you even greaterinsight into what’s been happening with agricultural land prices right here in the United States. To quote one expert mentioned within the article whose company specializes in selling agricultural real estate all around the U.S., “Nobody’s ever seen any prices like this.”
I’m mentioning this to you because so many brokers are looking for new opportunities. Agricultural land may not be your specialty within commercial real estate, but this is a market with a huge demand right now, where big players with a lot of money want to invest in more property.
As the great hockey player Wayne Gretzky once said when asked what made him so much better than all of the other hockey players, “I skate to where the puck is going to be, not to where it has been.
“When it comes to all of us having to eat food, this is not an option for us. More food will have to be grown to feed the world’s population, and some of the savviest investors in the world are recognizing this opportunity, and they’re capitalizing on it right now. So if you’re looking for opportunities within commercial real estate and you’re willing to do your homework, getting involved with agricultural land is skating “to where the puck is going to be”.
To view this week’s Featured Property click HERE.
Mike Stinson, a native of Monroe, Louisiana, is a graduate of Louisiana State University (LSU). A real estate licensee since 2004, Mike specializes in the sale and leasing of commercial real estate. A Designee member of the Certified Commercial Investment Member Institute (CCIM), Mike’s other professional memberships include Baton Rouge’s Commercial Investment Division (CID), the LSU Alumni Association, REALTOR Land Institute (RLI), an associate member of Louisiana REALTORS® (LR), and an associate member of the National Association of REALTORS® (NAR).
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).