Rental trends highlight growing split between formal and informal farm agreements
By Robert Blair, Partner and ARA specialist
Recent rental data from Defra suggests that farm rents are moving in different directions depending on the type of agreement in place, highlighting an increasingly uneven rental market as the Agricultural Transition continues.
Figures for the 2024/25 period indicate that while rents under more traditional tenancy arrangements have struggled to keep pace with inflation, informal agreements have continued to rise and are now at their highest nominal level for around ten years.
Formal rents under pressure in real terms
Rents under Full Agricultural Tenancies have fallen back over the past year. Although headline figures show an average rent of £174 per hectare, inflation has significantly eroded values, resulting in a notable real-terms decline compared with the previous year.
Farm Business Tenancy rents showed modest growth in cash terms, rising to £230 per hectare.
However, once inflation is factored in, this increase translates to little or no real growth, suggesting that formal FBT rents are largely standing still.
Seasonal lets followed a similar pattern and while headline rents edged up slightly, the impact of inflation means values have effectively fallen in real terms.
Informal agreements continue to climb
By contrast, informal arrangements recorded the strongest upward movement. Average rents under these agreements rose to £253 per hectare, representing both the highest nominal level in the past decade and a real-terms increase.
This growth has prompted questions about whether formal tenancy data fully reflects current market conditions.
Informal agreements, many of which operate outside traditional structures, may be absorbing some of the upward pressure that might otherwise be visible in formal rent statistics.
Some commentators suggest that the prevalence of higher-value informal arrangements may be masking underlying rental inflation elsewhere in the sector.
In practice, a proportion of these agreements may resemble unwritten or loosely documented FBTs, despite being treated differently for reporting purposes.
This has renewed discussion around the benefits of clearer, longer-term tenancy structures, particularly in an environment where certainty and stability are increasingly valuable for both landlords and tenants.
Significant variation by sector and region
Grazing livestock farms in less favoured areas continue to record the lowest average rents, while dairy farms face substantially higher rental costs.
Regional variation is equally marked, with average rents in some areas exceeding others by more than £100 per hectare.
These differences underline the importance of local context when negotiating rents, rather than relying solely on national averages.
Rents under scrutiny as transition continues
Landlords continue to point to land values, demand and long-term asset considerations when setting rents.
Tenants, meanwhile, remain focused on affordability and profitability as direct support payments reduce and income volatility persists.
As the Agricultural Transition progresses and support schemes evolve, farm rents are likely to remain a key area of focus.
If you would like to discuss how rental trends, tenancy structures or wider changes in the sector may affect your farming business, the Moore Thompson ARA team would be happy to help.