Institutional demand supports Illinois land values: report

Though Illinois farmland values dipped by as much as 14 percent in 2016, the declines could have been more severe without the continued backing of institutional investors, according to the Illinois Society of Professional Farm Managers and Rural Appraisers.

The 2017 Illinois Farmland Values and Lease Trends report shows that institutional investors accounted for 11 percent of Illinois farmland buyers in 2016, while local investors bought 15 percent and farmers accounted for 63 percent.

Institutional investors’ market share dipped as low as 3 percent in 2011 before regaining its footing in 2014, after which these groups have maintained an 11-12 percent share.

“Larger tracts of land continue to draw interest from institutional investors, pension funds, international buyers and others,” conference chairmen David Klien and Dale Aupperle wrote in the report. “This source of demand in Illinois has likely kept values more stable than restrictive ownership states west of the Mississippi.”

Land deemed “excellent quality” saw the smallest average value declines of 5 percent, with values falling from $11,600 per acre to $11,000 per acre, while land characterized as good quality declined by an average of 6 percent.

Meanwhile, average quality farmland values declined 12 percent. The steepest declines in value of Illinois farmland were seen in the fair quality land segment, which saw 14 percent declines from $6,900 per acre to $5,900 per acre last year, according to the report.

Though the report also showed that 43 percent of overall sales took place by private treaty, private treaty transactions moved at a slower pace last year than in previous years.

“What may have taken one or two months to accomplish in 2015 may take over a year to sell in the current market,” the authors wrote. “Buyers continue to be more cautious and are reluctant to pay up to purchase a property via private treaty.”

Despite the farmland value declines, the report also highlights “pockets of strength” throughout the state, characterizing the overall market as “finding its footing” as it entered 2017, as Agri Investor has previously reported.

“With continued low interest rates and potentially volatile equity markets, productive farmland continues to be a safe-haven for both farmers and investors,” Klien and Aupperle wrote.