Co-op sell off will do little to ease land shortage

The surprise news that the Co-operative Group was to sell off Britain’s biggest farm business sent shockwaves through the market but long term the disposal of 15 farms from Scotland to Kent will do little to ease the UK’s land shortage, forecasts Andrew Granger & Co's rural development specialist Rupert Harrison.

“It will have an effect, particularly in the areas where the Co-op Group farms,” says Rupert, “but the rural development market is such that it will swiftly absorb the new arrivals.”

That is not to underestimate the impact of the Co-op decision and its possible ramifications. “There is a great deal of uncertainty for the people these farms employ and some other landowners who are affected. That’s because apart from land that the Co-op owns, it also farms land that it rents, which is causing some consternation in the market,” he says.

Andrew Granger & Co, which has rural and planning teams based across Leicestershire, has received enquiries from landowners who have the Co-op as occupiers wondering what the implications for them might be.

“As far as we know, the rural farms are going to be sold as going concerns but the lack of a clear plan raises all sorts of questions about what the impact might be, when it will be felt and who will be the winners and losers.” 

A number of factors are in play that will ensure that high levels of demand for farmland continue.

Fundamentally, there is a shortage of farms for sale. 

Land prices have continued to grow, though they have reached a bit of a plateau, but the volume of farms for sale has reduced markedly over the past two or three years.

One of the reasons is the changing way farm owners deal with retirement, turning to a steady supply of contract farmers who provide the owners with an income and the ability to stay in their farmhouse.

There is a lot of demand from institutional investors, developers and people wanting to come into farming, and land is a solid investment, even if the returns are far from spectacular compared with other types of property.

Added to that is a long-awaited resurgence in the property industry, one of the sectors most depressed by the banking collapse.

“We noticed the difference on the first day back at work after Christmas,” says Rupert. “The phone started ringing, and it hasn’t stopped. Developers are looking for land they might get planning permission on in the next few years but there are also investors buying speculatively looking decades ahead.”

That’s one of the main reasons let land prices have been soaring. “Not so long ago, you couldn’t sell land with tenants on it for 50 per cent of the vacant possession value, but now it’s 70 per cent-plus,” he says.

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