Future-proofing the rural scene
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
10 minutes to read
Opinion
While writing the Rural Update this week, I came across an article on the BBC website about a little know super insulator called aerogel. Apparently, it’s the most effective insulating material known to science and has been around for decades. It’s claimed that just a 10mm layer of aerogel could reduce heat loss through walls by two-thirds. It got me intrigued as our story on retrofitting historical buildings emphasises just how challenging it will be to transform many rural residences into more energy-efficient buildings. So, could this be a key to those conversions? Well, unfortunately, it appears not, as it costs five times more than standard board insulation. But it could have its place in certain circumstances. What it does remind me is that technology and skills are going to be crucial to help the rural sector meet the government’s 2050 net zero target - whether that is installing secondary glazing or EV charging points. The report on retrofitting historic buildings shows that proper investment and strategic leadership in a skilled workforce and technology are so important. And we shouldn’t forget the place our rural landscapes will play in reaching net zero. So, it was encouraging to see that the latest version of the Peatland Code will expand to include more lowland peat (see below). This will surely open up more investment to help restore these crucial habitats. 2050 is a long way off, but it feels that the UK will undoubtedly miss its net zero targets unless the opportunities are grasped now.
Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here
Mark Topliff, Rural Research Associate
In this week’s update:
• Commodity markets – Bearish sentiment hits grain prices
• EV charging – Office tenants driving demand
• Energy efficiency – Retrofitting historic buildings
• Valuing woodlands – KF expert leads RICS webinar
• Poultry register – Defra consultation opens
• Peatland code – More lowland included
• Biodiversity Net Gain – Knight Frank guide released
• International news - North Korea’s radical rural reform
• International news - Record-breaking Aussie production
• The Wealth Report – 2023 edition out now
• Farmland Index – Agri-land 2022’s top-performing asset
• Staff Salaries Report – Rural wages benchmarked
• On the market – Kiwi orchard up for grabs
Commodity markets
Bearish sentiment hits grain prices
A weaker pound couldn’t offset bearish sentiment in the wheat and oilseed markets last week. Cheaper Ukraine and Russian exports are still weighing on values, and there are expectations in the trade that the Black Sea grain export deal will be extended, possibly for another 120 days. Oilseed rape prices were additionally pressured by a fall in the price of alternative oils and declines in the European energy market.
Key inputs, in contrast, remained stable during the previous week. Nitrogen fertiliser prices have been falling since autumn, to the dismay of those who bought at higher prices last summer. Apparently, demand in Europe has picked up, and reducing export volume availability has meant prices have levelled off.
Talking Points
EV charging – Office tenants driving demand
Farms and estates might want to take note of the increasing trend of office tenants that expect EV charging points. If you let or are considering repurposing buildings into offices, installing EV charging points could help entice new tenants to your buildings. Knight Frank’s Senior Energy and Sustainability Consultant Robert Blake says, “he has been approached by several rural estates asking about EV charging for tenants. Fitting charging points will also help those tenants attract staff, and from the rural business perspective, it will future-proof buildings.” Read more from Robert in this Bloomberg article on electric car charging points being the newest workplace perk.
Energy efficiency – Retrofitting historic buildings
Britain’s rural sector features many beautiful historic buildings, but they are difficult to retrofit for energy efficiency improvements, requiring specialist skills. A new report highlights that an additional 105,000 skilled workers will be needed through to 2050 to meet the UK’s net zero targets. The Heritage and Carbon report says this is more than double the current workforce. Of the 105,000 extra workers, 81,000 are needed for residential property alone.
Jess Waddington, a Partner in the Rural Consultancy team, explains that “the retrofitting of historic property is not straightforward, and with more traditional constructions, no property is ever the same. How we approach improving energy efficiency has to be tailored to meet the specific needs of the subject property. While government support for increasing efficiency standards is often through the carrot (grants) and stick (fines) approach, it must be recognised that a blanket approach for retrofitting is inappropriate. Traditional methods, such as natural fibre insulation and secondary glazing, should be paired with modern tech, such as low-energy lighting and heating controls, to provide a blended approach that does not damage the historic fabric. A low and slow approach to temperature control in properties with solid wall constructions will lead to less condensation and, hopefully, a lower energy use.”
Valuing woodlands – KF expert leads RICS webinar
A focus on ESG, climate change, the journey to net zero and attractive long-term returns are driving demand from corporations and investment funds to invest in creating new and developing existing forestry and woodlands.
RICS is running a webinar for members to provide guidance on undertaking valuations to consider the continuously evolving and complex factors which can impact the value of woodlands. Subscribers will be ably guided by Knight Frank’s Tom Barrow and Andrew Bronwin. Click here for more info.
Need to know
Poultry register – Defra consultation opens
Keep less than 50 poultry? Well, Defra, Scottish Government and Welsh Government have launched a consultation on an expansion of who should register keeping poultry. The preferred plan would require all bird keepers to register their birds through the Animal Plant and Health Agency (APHA).
Another proposal is to limit registration to keepers of ten birds or more. Currently, only premises that keep 50 or more poultry and other captive birds need to register their birds on the Great Britain Poultry Register. A proposed change is in response to lessons identified from previous bird flu outbreaks.
The consultation is open for views until 31 May 2023.
Peatland code – More lowland included
Fen peatlands will now be eligible under the revised Peatland Code announced on 8 March. The minimum depth for the eligibility of bogs has also been updated to allow shallower peat bogs – 30cm reduced from 50cm. Field survey methodologies have been re-examined to ensure continued robustness in monitoring the condition of peatlands. The new Peatland Code – Version 2.0 – must be used for all validations and verifications from 1 June 2023.
Agricultural lowland peat soils, including fens make up just 15% of all the UK’s peat soils but account for 59% of UK GHG peat emissions according to the Peatland Programme. Zoe Coulson of the rural consultancy team who works with clients restoring peatlands says “that these landscapes are so important to restore and help reduce the UK’s greenhouse gas emissions. The new eligibility will incentivise those managing lowland peatlands and could attract more private finance to the code.”
Biodiversity Net Gain – Knight Frank guide released
New developments will need to enhance biodiversity, Defra confirmed last month. A 10% uplift in biodiversity due to a new development will be required for large sites from November this year and smaller sites from November 2024. Knight Frank’s rural team has gathered an overview of what landowners, natural capital investors and developers need to know and insights from the team. Whether that’s what a developer needs to produce for a planning authority or what a landowner should do if they want to sell biodiversity credits. Check out the guide here.
International news
North Korea’s radical rural reform
If we thought food security was a big enough issue for the UK, feel for our rural counterparts in North Korea. Leader Kim Jong Un has called for a radical change in agricultural production amid reports of the country teetering on the brink of famine. A combination of poor harvests, extreme weather, lockdowns, and reduced trade with China during the COVID-19 pandemic have led to severe food shortages. Kim reportedly announced “the fixed determination and will of the Party Central Committee to bring about a revolutionary turn in the agricultural production without fail,” saying that nothing is impossible as long as strong leadership exists. Does the latter also apply to the UK?
Record-breaking Aussie production
The value of Australian agricultural production is set to achieve a record $90 billion for the 2022-23 marketing year, according to the government’s agricultural research arm, ABARES. This forecast is off the back of the previous year’s record and driven by a third consecutive La Niña event – which brings wetter weather – and continued high commodity prices. Winter crops did exceptionally well, with record wheat and oilseed rape yields.
With Aussie output doing so well of late, land prices have surged on the back of strong commodity prices and favourable production seasons and are supported by low-interest rates. Rural Bank reports that in 2021 alone, land prices increased 20%.
But ABARES expects lower agricultural production for the coming year with prospects of a drier season coupled with higher input costs and debt levels.
Knight Frank Research
The Wealth Report – 2023 edition is out now
Knight Frank’s leading piece of thought leadership on property and wealth trends was launched last week and includes an interview by me with one of Scotland’s pioneering rewilders, as well as some thoughts on why farmland could be one of this year’s most in-demand property investments. Download your copy to find out more.
Farmland Index – Agricultural land top-performing asset in 2022
As predicted, the latest results of the Knight Frank Farmland Index show that agricultural land as an investment beat inflation in 2022 and outperformed other asset classes, including mainstream house prices, luxury London house prices, the FTSE 100 share index and even gold. According to our index the average value of farmland rose by 13% over the year to hit over £21,000/ha, a record high. A shortage of supply and continued strong demand from a wide range of buyers underpinned the market. Download the full report for more facts and figures.
You can also hear some thoughts from my colleagues and me on the outlook for property markets in 2023 in the latest edition of Intelligence Talks, our research podcast.
Estate Staff Salaries Survey – Rural wages benchmarked
Just a reminder that the latest edition of the Knight Frank Estate Staff Salary Survey has recently been published. The report reveals the average salaries paid for a wide range of rural estate and farming roles and level of wage increases being offered by rural businesses. Also highlighted are the key employment issues facing the rural economy. Download your copy here or get in touch with Chris Terrett for more details.
On the market
Kiwi orchard up for grabs
The impact of Cyclone Gabrielle, which ripped through North Island, is set to make a severe dent in the food-producing capacity of New Zealand, according to our man on the ground Nick Hawken, who heads up the rural team at Knight Frank associate Bayley’s. The Hawkes Bay area was particularly hard hit, reports Nick. However, his team has still managed to launch a fantastic 31-hectare kiwi-farming opportunity near Ōpōtiki in the eastern Bay of Plenty. Guide price is NZ$21 million reflecting the profitability of kiwi production.
Image of Ely Cathedral Wetland by Mark Topliff