In 2008, when liquidity in the credit markets dried up, water became as attractive an asset for investors as oil or gold. 12 years later, already in 2020, water as an asset hit Wall Street and had a huge success. Its appearance on the futures market was the result of a chain reaction caused by a certain shortage of supply and a slowly but surely growing "panic", if we may say so.
After all, who hasn't heard at least once in their life about "not endless supplies of water that won't be enough for the whole planet"? And if you look at some regions of the Earth, there really is a shortage of clean water, although it is not caused by a lack of resources, but by badly organized supply chains. Nevertheless, the legend of overpopulation and lack of water continues to exist and capture the minds of an increasing number of people. Including investors who expect to make good money on such assets in the future.
The chain of such fears, at the same time, goes far beyond the water futures market, as evidenced by the changes in recent years in the Spanish real estate market. So, today it will not be surprising to see an investor systematically investing in agricultural land with access to water resources. They are increasingly being bought up in various parts of the country, but such assets are best sold in the Principality of Asturias.
As Hector Rodriguez, Head of Agribusiness at CBRE Spain, a consulting company, explains: "The most attractive and sought-after assets are currently agri-food companies and agricultural land. Speaking specifically about the latter, the most popular are farms with an area of more than 200 hectares, located on the plain, with high availability of water. The climate should allow the cultivation of olive trees, nuts, citrus fruits, tropical fruits, grapes and so on».
Such plots and lands can be both "greenfield" and "brownfield" assets. That is, both already configured and ready for use, and completely empty, ready for development in the way that their owner needs. For his money. Thanks to the large empty spaces in central Spain (the so-called "deserted Spain"), investors have access to large expanses of land available for purchase at fairly low prices.
The variety of climatic conditions and agricultural crops allows us to produce a wide range of products for sale. In the last year and a half, food has become a separate value against the background of the inflamed food crisis. By the end of 2023, 345 million people on the planet will find themselves without guaranteed access to food. The latter is connected with the conflict between Russia and Ukraine, which were the largest producers and exporters of agricultural products in the world.
Returning to Spain. Although the market for agricultural land and farms is still held by small enterprises, in the last few years they have been squeezed out by large funds and private investors. It was the same hype around water resources that was mentioned earlier that played into this.
Medium-sized businesses are also already well represented in this sector, for example in the purchase of fruit plantations. It is worth noting that such farms began to appear in the northern regions of Spain, although traditionally they were considered specific to the south and center of the country.
However, according to the Tinsa report "Agricultural Land in Spain in 2022", pastures are considered the most valuable agricultural land. In Asturias, most of the usable agricultural land is just meadows and pastures. Therefore, agricultural assets with water resources in this region are particularly popular.
But besides access to water, another reason contributing to the popularity of Asturian assets is the development of the dairy industry. This business has recently needed more and more pasture land. Therefore, investors can enter the market from two sides at once, either through investment in such enterprises, or through the purchase of land for which these enterprises have a growing demand.
Andrea de la Hoz, Tinsa Research Consultant, points out: "Cantabria, Asturias and Galicia are the communities with the highest unit value of meadows and pastures in all of Spain. Their figures range from 19,000 to 27,000 euros per hectare. Specifically in Asturias, the cost of one hectare exceeds 26,000 euros. In the northern part of the Principality, prices even exceed the average of La Rioja and Navarre."
So far, similar assets in the heart of the Iberian Peninsula are not as popular. Prices for a hectare of land there range from 6,000 to 9,000 euros. Perhaps soon the interest of investors will migrate there as well.