col Trends in Agricultural Land and Lease Values | Bevill Vineyard
February 9, 2016

Trends in Agricultural Land and Lease Values

Sonoma County’s agricultural markets remained very similar to what was seen in the two previous years. 2014 saw strong demand and sales volume for commercial vineyard and vineyard estate properties of all sizes. This continued trend is a direct result of a strengthening economy, low interest rates, and wineries purchasing vineyards and plantable land to better control grape supplies and costs, given increasing regulations and higher costs for new vineyard developments. Overall market pricing has seen steady, with upward movement seen within the existing value range. Cool climate Pinot Noir and Chardonnay vineyards with established reputations for luxury to cult wine quality have been at record highs. Sonoma and Napa County wineries remained the principal buyers for large commercial vineyards, as well as small vineyard designated or boutique style vineyards. Other buyers included foreign and local investors, and Native American Tribes.

American Viticultural Areas (AVA) and vineyard designates continued to play a greater role in property pricing. There can be substantial value differences within a single AVA due to individual micro climates, soils, and grape varieties grown. These factors greatly influence grape tonnage and quality and directly impact net earnings. A good example of grape pricing variance is the Russian River Valley AVA, where vineyard prices can range from approximately $80,000 to over $125,000 per acre.

Even after three years of large grape crops and stabilization in grape pricing, there is continued demand for appropriately priced properties. Vineyard viability remains highly scrutinized and marginal vineyards continue to be purchased at prices near bare land values. In the current market environment, even lifestyle vineyards are expected to provide a return over farming cost.

“Non-farm” and “non-local” professionals, executives, or business owners remain the principle buyers or properties that provide a “lifestyle” element, such as private view sites in desirable locations or properties improved with large estate quality homes. Lifestyle properties have rebounded in value since 2011. A few “world class” properties have been offered for sale in the $20,000,000 and over category, but have not sold.

Few Sonoma County wineries sold in 2014. Winery sales indicated a stable value trend for smaller facilities (40,000 cases or less). Sales of wineries with successful brands, daily public tasting, and locations in primary tourist areas exhibited little building depreciation. Wineries that sold without a recognized brand exhibited normal levels of physical depreciation, plus some external obsolescence. Larger facilities (40,000 cases or more) were discounted beyond typical levels of physical depreciation due to a very limited buyer base. Vested winery permits for unimproved properties typically only contribute value when the property is in a primary tourist area. Significant premiums are paid for permits, on sites in prime tourist areas that allow for public tours, tastings, retail sales, and events.

The Sonoma-Marin agricultural area is described as coastal foothill pasture and hardwood forested lands within Southwestern Sonoma County and Northwestern Marin County. Most of the area is devoted to agricultural uses of livestock pasture and dairies, in addition to a limited number of equestrian facilities, poultry facilities, vineyards, and specialty vegetable production. Average to estate quality homes are also positioned throughout the area. The residential appeal is attributable to the desirable coastal climate, rural foothill settings, and proximity to San Francisco and Bay Area employment centers.