If you’ve only ever invested in traditional CRE segments like office and multifamily before, you might assume that farmland is in a separate universe.
You might even write it off as an “alternative” that has nothing to do with your rent-roll, tenant-dependent world.
But make no mistake: Farmland is commercial real estate, and a surprisingly resilient version of it.
Farmland meets the same definition as any other commercial asset in that it generates income from land that’s used for business purposes.
Its only difference from the conventional CRE categories you’ve been used to (and perhaps its biggest advantage) is that it produces food — an essential good.
And unlike rent, a food-driven demand curve won’t suddenly collapse just because interest rates rise or because a corporate tenant decides to downsize.
The bottom line on farmland as CRE
✅ Farmland qualifies as CRE—and behaves more predictably.
✅ Its long-term performance is exceptional.
✅ It can stabilize portfolios during market stress.
✅ Risks exist but can be underwritten.
Is farmland considered a safe haven for CRE?
Yes, because farmland holds steady when other CRE sectors don’t.
Income from CRE sectors like office and retail (and even “safer” segments like multifamily) tends to rise and fall fast because it’s tied to tenant behavior and the health of local job markets.
It’s not like that for farmland — after all, people still have to eat, and production has to continue even in a terrible economy.
Farmland’s impressive performance record
Did you know that US farmland delivered an average annual return of 10.52% from 1992 to 2023?
It has beaten many categories that CRE investors normally compare themselves against, including bonds (4.67%), REITs (9.21%), timberland (8.72%), and gold (5.67%).
It even beat equities at 10.07% while carrying far less volatility.
For context, annual volatility for farmland sits at just 6.61%, which is a fraction of the 17.71% the S&P 500 exposes investors to in a typical year — and the contrast becomes even sharper when there’s an economic crisis.
Remember 2008? Farmland produced positive returns while most markets collapsed.
In 2022, as the S&P 500 dropped more than 18% and bonds endured their worst year in decades, the NCREIF Farmland Property Index posted an impressive 9.60% return because crop prices were high and there wasn’t a lot of available land.
Farmland was also one of the strongest inflation hedges during that period.
It tracked closely with rising prices, showing a 0.97 correlation with the Consumer Price Index from the start of the pandemic through 2022 — very unusual for any real estate asset.
Long-term fundamentals will work in your favor
Global food demand is expected to rise by 60% by 2050, but the amount of usable farmland per person is only getting smaller.
Because of that imbalance, the farmland that does exist — especially the most productive, well-located acres — becomes more valuable.
Data from the USDA shows that farmland experienced a 14.3% national jump in a single year.
Unlike bubble pricing in AI and in other speculative sectors, these gains are founded on fundamentals: high-quality cropland is limited, and producers continue to generate solid cash flow from it.
Farmland is genuinely earning more and becoming harder to access.
Farmland doesn’t follow the stock market
Farmland can also help you stabilize a portfolio because it barely moves with equities.
The correlation between farmland and the stock market since 2000 is just 0.07, which is essentially no relationship at all.
That means when stocks drop, farmland doesn’t automatically follow — and in many periods, it actually holds its value or increases.
Farmland hedges inflation more effectively than most CRE
Because farmland is both scarce and essential, its income naturally keeps pace with inflation. When inflation pushes food prices up, the value of crops rises at the same time.
You don’t need to do renovations or spend money on capital projects to reset your asset’s income — the land’s output becomes more valuable on its own.
Inflation directly increases what the land produces.
Large institutions are (very) interested
More institutions have ESG mandates, meaning they are required to place money in environmentally responsible assets. If you hold farmland, you may become eligible for that inflow of capital.
Across multiple studies, assets that credibly meet sustainability criteria do tend to trade at tighter cap rates and draw more buyer interest.
Related blog: 10 Ways Agricultural Loans Can Help Farmers Grow
Diversify your traditional CRE portfolio
If most of the assets in your CRE portfolio track the economy, farmland gives you something that doesn’t. You don’t have to worry about your returns being negatively impacted by recessions and layoffs.
The performance of farmland is tied to food demand, which doesn’t shrink in downturns.
Technology is making farmland an even better investment
You’re not buying into a risky, old-fashioned operation.
Farming is becoming a tech-driven industry, and that makes farmland a stronger, more predictable investment than it used to be.
Tools like precision irrigation and AI yield models reduce the guesswork in farming and push productivity higher.
Access is no longer a barrier
Farmland used to be hard to invest in because you had to buy an entire farm, but these days, you can buy small slices of farmland or invest through pooled vehicles using dedicated investment apps, so you can get exposure without taking on the work of running a farm.
Related blog: Tips For Farmers Applying for Agriculture Loans to Buy Land
Know the risks before you allocate
Of course, farmland isn’t 100% risk-free. The weather can change yields and commodity prices can swing revenue.
Government policies can also alter incentives or operating costs.
You also have management considerations that differ from conventional CRE, as farmland requires operational expertise.
But if you know how to underwrite assets, the risks in farmland aren’t deal-breakers.
They can be handled through how you structure the investment (leases, operators, insurance, crop mix) and by choosing regions with strong production histories and lower climate or regulatory volatility.
We have a range of farm financing solutions here at Private Capital investors. Tell us about your plans.
