Farming News - FBT Rental Levels Becoming Increasingly Diverse
FBT Rental Levels Becoming Increasingly Diverse
Farm Business Tenancy rents 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/acre compared with just 32% in 2008. Looking at arable rents (including potato and vegetable land) in isolation 61% of all arable FBTS were over £100/acre and as illustrated in the chart below there was a huge range in values with some achieving over £500/acre.
Growers are often now looking at factors including proximity to their core holding and the quality of drainage when offering on an FBT 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 included in an FBT during 2012 was 150 acres with 75% being 200 acres or less and 5% at over 500 acres.
In terms of years taken, the popular FBT term was five years (23%) with two and ten 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 in the FBT.
Johnny Dudgeon director of Savills rural estate management said, "There is a growing appetite for taking on extra farmland on a FBT as opposed to a contract farming arrangement. Threats to yields and commodity price volatility are pushing the balance of growers towards FBTs, where the perceived risk is less, although this needs to be balanced with the taxation consequences of the FBT route.
"If current market conditions continue I suspect we shall see more FBTs agreed on a three to five-year term with shorter time periods between reviews and break clauses."