Carbon-offsetting leads to land prices soaring as corporate buyers swoop in
Scotland’s land market has been transformed as corporate buyers swoop in for farmland in an effort to offset carbon emissions, according to a new report.
Findings from the Scottish Land Commission show the changes to rural land markets and values, amid strong timber prices and rising demand in non-farming leisure estates.
Corporate entities are increasingly interested in plantable land and forestry holdings, according to the Rural Land Market Insights report.
And non-farming investors are playing an increasing role, with heightened demand for smaller farms as lifestyle holdings.
The growing role of nonfarming investors has resulted in land values being increasingly influenced by long-term investment potential and corporate environmental, social and governance (ESG) considerations, according to the report.
Farmland values rose in Scotland by 31.2 per cent in 2021 against 6.2 per cent across the UK.
And almost half of all estates purchased in Scotland last year were sold to corporate bodies, investment funds or charitable trusts due to the carbon offsetting potential.
Carbon offsetting allows companies to rectify their gas emissions by investing in renewable energy projects or planting trees.
The report was compiled by Scotland’s Rural College (SRUC) in partnership with land agents Savills and Strutt and Parker, with support from the Royal Institution of Chartered Surveyors (RICS).
It draws on published market information and interviews with industry experts to provide a current picture of buyer and seller motivations, to better understand the land market and what is driving it.
Hamish Trench, chief executive of the commission, said: “Emerging carbon and natural capital value is an increasing influence, but other drivers, particularly high timber prices and forestry values remain significant.
“(The report) emphasises that while the amount of land coming to the market has remained largely the same over recent years, demand from different types of buyer has increased significantly, raising prices.” The report also found that off-market sales make up a significant proportion of land activity as a third of farmland, forestry and plantable land were sold in this way, rising to 60 per cent in estates sales.
The findings also recognise there is an element of speculation in the land market as investors look for a safe haven amid a turbulent global economy and gamble on future carbon values rising.
Strong growth is expected to continue due to continued low supply and high demand, high levels of private wealth and corporate interests seeking land, long-term policy on climate change and increasing pressure on global timber markets and food supply chains.mrtrenchadded:“the way the land market functions is important to Scotland’s ambitions such as net zero, nature restoration, repopulation, and community empowerment. Being able to participate in the market shapes not justwhoownsscotland’sland, but who is able to make decisions and who benefits from land and its economic, social and environmental value.”