5 September 1997

Dont expect big falls in rents this autumn

By Tim Relf

DONT expect to see big falls in FBT rents this autumn, says Jeremy Procter of Bidwells.

Tenders of approaching £150/acre remain common for arable land, despite the fall in farming profits.

Tenants are bidding a higher proportion of the "divisible surplus", in a bid to acquire more land and spread fixed costs, says Mr Procter. Recent signs from Brussels that the present support regime will remain unchanged for three years have helped confidence.

Bidwells James Squier says: "Farmers have been bidding whatever it takes to get the land next door. They are single-minded in their determination to win land."

Landlords are mainly interested, however, in a sustainable level of rent and continuity of occupation, adds Mr Squier. "Few will want to go back to the market every three years and see a new face on their land."

For tenants who have served notices to trigger reviews next autumn this may mean an "unpleasant surprise", continues Mr Procter.

Levels are set in accordance with the open-market, with evidence provided by comparables. Landlords will be able to show, says Mr Procter, that plenty of people are still paying £150/acre.

A far cry from the old days, when farmers tendered big sums including "key money" to gain them occupation, confident that with the first review, so payments would tumble.

Then, with levels determined by the units productive capacity, tenants could "hide behind the review formula", says Mr Procter.

In the example, a three-year tender last summer of £145/acre (£360/ha) represented 54% of the "divisible surplus". (Lower-than-expected returns meant the actual proportion was 77%.)

Bids recently have been well above £117/acre (£290/ha) – the point at which rent would again represent 54% of the projected divisible surplus.


June tender budget – FBT 100ha arable block

19961997

BudgetActualBudget

Output106,57586,90092,000

Variable/fixed costs40,25040,25038,275

Surplus before rent/interest66,32546,65053,725