Green Energy, Agritourism & Northeastern Illinois Farmland
From the diversity in property types to market forces shaping land values, check out insights into one of Illinois' most complex regions influenced by both agriculture and urban sprawl – northeastern Illinois.
A Snapshot of the Northeastern Illinois Farmland Landscape
The collar counties around Chicago, an area marked by diverse property types and agricultural practices, have traditional agricultural tracts coexisting with recreational lands, rural residences and commercial properties including wholesale greenhouses and equestrian facilities. The Chicago metro-area drives demand for a variety of rural properties and even brings urban features—like large-scale equestrian properties and high-density greenhouses—into the mix.
This region also includes specialized livestock operations, such as hog and dairy farms, alongside highly productive farmland growing corn and soybeans. Recently, organic farming has gained momentum in the area, expanding the spectrum of farming practices and the value propositions they offer.
Land Values and Demand Dynamics
In the last two decades, Illinois farmland has seen significant appreciation, with prices climbing from around $4,000 to more than $15,000 per acre, and some land selling for over $20,000 an acre. Despite headwinds, farmland values remain resilient. However, a slight deceleration, especially in top-tier Class A farmlands, saw a modest decline in value of less than 5% over the past year, contrasting with the 11% increase in 2022.
Recent auctions provide insight into these trends. For example, a no-sale auction in DeKalb and Ogle Counties highlighted the limits buyers are reaching, with the highest bid just over $15,000 per acre. Although this bid aligns with other recent sales, it signifies a softening from the high activity levels seen in prior years.
Supply, Demand, and the Role of Interest Rates
The reduced supply of farmland on the market, especially in DeKalb County, may be a contributing factor to price stability, despite lower transaction volumes. Marketing periods are also stretching, and properties are taking longer to sell, indicating subtle shifts in market momentum.
National economic factors, such as interest rates and commodity prices, play a pivotal role. Higher interest rates and relatively low commodity prices exert downward pressure on farmland values, yet demand remains steady as farmers and investors alike pursue land ownership as a long-term asset.
Parallels with Past Economic Cycles
Reflecting on historical cycles, you could draw parallels to the downturn in farmland values post-2012. While the 2012-2014 market adjustment echoed similar concerns over low commodity prices, the current economic landscape offers unique variables, such as inflation control measures by the Federal Reserve. Though there are some headwinds, buyer interest remains strong, sustaining land values amid today’s high-rate environment.
The Influence of Green Energy and Sustainable Practices
Green energy initiatives, including solar and wind projects, have become more prominent in northeastern Illinois, influenced by proximity to Chicago and strong incentives for renewable energy sources. Solar contracts negotiated several years ago differ significantly from those signed today in terms of rent escalators, indicating a new and evolving market.
In terms of sustainable agriculture, there is a growing interest in organic practices and soil health. While data on how soil health impacts land values is still emerging, these considerations reflect shifting priorities among landowners and buyers. Compeer Financial’s appraisal team is exploring ways to quantify soil health’s impact on valuation, which could influence future appraisals as sustainable farming gains traction.
Looking Ahead
Though farmland in northeastern Illinois faces some market pressures, demand continues to outpace supply, underscoring farmland’s enduring value. With ongoing developments in green energy and organic farming, Compeer's appraisal team remains dedicated to monitoring trends and providing accurate, insightful assessments tailored to the unique dynamics of this region.
For farmers and investors, understanding these trends can provide a clearer picture of how to navigate today’s real estate market and make strategic land acquisition and management decisions. The appraisal team’s expertise helps contextualize the farmland market, emphasizing Compeer’s commitment to enhancing the lives of those involved in agriculture and rural America.
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