By Nicholas Leider
DEEP-ROOTED DEMAND
The agricultural real estate market remained relatively steady amid 2020 ’ s chaos , thanks to the inherent value of the commodities produced by farms , dairies , and ranches .
Considering commercial real estate ’ s
overwhelming involvement with the built environment , the land sector can be an overlooked niche at times . If there was any question about our industry ’ s diversity in offerings , CRE includes Manhattan skyscrapers and Nebraska farmland . But those familiar with agricultural real estate
understand the sector is dynamic , with its own challenges and opportunities as well as familiar issues faced by experts in retail , office , or multifamily properties .
To dig deeper into the land sector , we spoke with Doug Phillips , partner and REALTOR ® with Schuil & Associates Real Estate , a firm that specializes in the agricultural land sector . Growing up in the farming industry and earning a degree in agricultural engineering , Phillips entered land real estate in 2008 with the experience and relationships to excel in a dynamic market that remains niche in CRE .
CIRE : HAVING BEEN WITH SCHUIL & ASSOCIATES FOR A DOZEN YEARS , HOW HAS THE SECTOR CHANGED IN TERMS OF INVESTMENT TYPES , ANALYSIS , AND VALUATIONS ?
PHILLIPS : There is a very diverse pool of buyers that look at this sector of CRE . But from the outside looking in , people might see it as a small , old-fashioned industry when , in reality , it ’ s quite the opposite . It ’ s dynamic ; it ’ s changing . There is a lot of excitement and activity within the sector . While the typical buyer 50 years ago might have been a neighbor down the street , now it could be a large institutional fund from anywhere in the world .
CIRE : WHAT ’ S BEEN KEY TO
ADAPTING AND STAYING COMPETITIVE IN A MARKET THAT IS MODERNIZING ?
PHILLIPS : The ag sector has always been relationship-based , and it will continue to be so . From that standpoint , brokers will need to have those relationships with local growers , dairymen , and processors — and to continue to build those relationships . It ’ s important to have the trust from those clients , because a lot of local farmers are skeptical of big buyers or institutional funds .
CIRE : CONSIDERING THE PUBLIC HEALTH , ECONOMIC , AND SOCIAL STRUGGLES RELATED TO COVID-19 , HOW HAS THE PAN- DEMIC AFFECTED THE LAND MARKET ?
PHILLIPS : Initially , in March and April , there was some hesitation with buyers and sellers just due to the global uncertainty — that was true across all industries . That first shutdown was unprecedented and gave everyone reason to pause . Nobody knew how long it would last and what the total effects might be . Deals that were in process saw some delays with closings of banks , appraisers , title companies , etc . But everything has seemed to catch back up from the transactional side to where I would say it ’ s nearly back to normal . On the operations side of agriculture , for growers and producers , business never really stopped or slowed down . Ag is one of the most essential businesses , with food production and processing . It ’ s not possible for them to flip a switch and shut down their operations for a month or two . You can ’ t tell a tree to stop growing or a crop to stop maturing or a cow to stop making milk . That never really stopped . Processors now have safety protocols in place , and capacity is pretty much back to full speed .
Now , regarding pricing , we haven ’ t seen any big adjustments . All ag properties produce a commodity that has its own market . Many of those commodities were drastically impacted in the short term . Dairies are a great example .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE WINTER 2021