By Barbara Jackson, Tango Commercial Real Estate Tucson
TUCSON, ARIZONA -- For decades, Arizona school children have been taught the five Cs: Copper, Cattle, Cotton, Citrus, and Climate. Three of those “C’s” are agriculture. It has been said – If it wasn’t for Copper and Cattle – Arizona wouldn’t be here. The Miners and Ranchers are who settled this state. And thanks to major rivers such as the Gila, Salt and Santa Cruz long before Arizona was a state, and before there was a United States, agriculture thrived in the region. Agriculture’s history in the Grand Canyon State stretches back more than 4,000 years. Archaeological records show Indigenous people growing gardens to sustain their families. When explorers traveled through the state in the early 19th century, they found people growing corn, wheat, barley and raising cattle. They also found one of the most amazing irrigation systems, one that is still used today. The Hohokam people built the canals to move water from the Gila and Salt Rivers to their fields.
Ag land today in Arizona is still farmland, cattle ranches and dairies. Today, agriculture in Arizona contributes more than $23.3 billion to the state’s economy. One study puts the number of jobs supported by agriculture at approximately 138,000, and the number of workers employed at 162,000. The animal industry, led by cattle ranching and dairy, is the largest agricultural sector. These farms and ranches are about 26 million acres. Arizona also has the highest proportion of land allocated to Native American reservations, at 28%. Tribes and the state and federal government own 81.8 percent of all Arizona land, leaving just 18.2 percent open to private owners.
But the farmlands are going away - very fast - more than an acre of farmland is lost per minute in the United States, over 1 million acres are being developed annually. Between 1997 and 2017, 36% of all farmland in Maricopa County was lost.
Another major loss to ag is foreign ownership. Anyone can buy US farmland. China currently owns almost 200,000 acres of U.S. farmland. Major investment companies are buying farmland for the water rights and re-selling the water to the highest bidder. Tucson did this in the 70’s buying up much of the Avra Valley farmland. A 1978 law was supposed to ensure that foreign-owned farmland is tracked through the USDA, but the data collection associated with that law appears to be incomplete.
The House Appropriation Committee approved an amendment to the USDA funding bill. Not only would it ban China from buying any more farmland, but it would also bar current land from being eligible for farm subsidies. The amendment was added by Congressman Dan Newhouse of Washington state, who calls it a national security issue.
How to stop that loss of land is a major problem for Ag. One tool being widely used today is putting land into conservation easements.
We always talk about the highest and best use for a property. Approximately 29% of the land in the United States is too wet, rocky, steep, or arid to support cultivated agriculture. Cattle ranching is the perfect example of “upcycling.” Cattle graze on grasslands turning natural resources like pastureland and solar energy into beef and other everyday products. They are “upcyclers” that take otherwise useless materials, add nutritional and environmental value, and transform them into a high-quality protein and essential micronutrients. In fact, the U.S. beef industry produces more than three-times more high-quality protein for the U.S. food supply than cattle consume.
What is the real “elephant” in the room – WATER, or the lack thereof. During the construction of the Central Arizona Project (CAP) farmers all along the route of the canal were encouraged to “deed over” their wells and use cheaper CAP water. Most of them did so. Fast forward to 2022 and in the major central valley irrigation districts the farmers received a 30% decrease in their CAP waters. In 2023 the other 70% will go away. Meanwhile the government is providing millions to drill wells to replace that water loss.
Today approximately 70% of the state’s water goes to agriculture – but one needs to remember – when it goes on a crop it soaks into the ground allowing that plant to grow, most of that water is being returned to the water aquafer below. It comes back to us, unlike water used for residents or industrial.
Here at Tango our thoughts regarding industrial properties are that is hard to draw trend conclusions other than the supply – demand for industrial SPACE indicates there should be increased sales activity for industrial parcels to build for lease or sale buildings on. Currently $2.50 / SF in the southeast - $6.00/ SF in the northwest. When you think about it, most of the industrial space in Tucson is OLD! Much of it was built in the 1970s and 1980s. Additionally, the spaces are obsolete for the way business is done today. We need more properties that are configured differently, climate-controlled vs swamp cooled and have access to high speed data. You can argue the case that not should there be increased sales activity for industrial parcels to build new facilities but many of the current industrial properties, though strategically positioned, need to be torn down as they’re obsolete and replaced with something useful. Goes back to the saying, “Tucson isn’t overbuilt, it’s under demolished!”
Speaking to a fellow commercial/ag realtor in the Phoenix area he said: “Commercial and Residential land is hot in Maricopa county. Here in the East Valley Dairies are going to both and several have been sold for Industrial sites. Mesa converted a large part of former Industrial to Residential. Most of the valley has CAP or Salt River Water, so water is not an issue.
Even Maricopa has lots of development again with the State selling a half section for about $300,000 / acre. Except for land close to Casa Grande, there is not much rural activity for farming or industrial. Farmer to Farmer sales (which depend on the water situation) are almost non existent.”
Today in Marana farmland is selling for $60,000 to $65,000/acre. No one will farm that land – it will be developed. Farmland in Arizona that will be farmed – if it has water is $10,000 to $30,000/acre. Right now farmland in the heart of the mid-west is auctioning for over $10,000/acre
So the age old trend continues – ag lands go away to residential or industrial development. Needless to say the transition of farmland to industrial is driving the price of farmland up and therefore land for industrial use.
Barbara Jackson, Vice President Agricultural & Industrial Properties at Tango Commercial Real Estate is a seasoned agribusiness and life science professional. She literally grew up in the agribusiness and has a passion for bovines and the cattle industry! A native Tucsonan, she was raised on a commercial feed yard and her family pastured cattle where Green Valley is today. Barbara graduated from Washington State University in Pullman, Washington, with a BS in Animal Science, minor in Ag Economics. After college and one year at her family’s feed yard business in Arizona, she left and joined Syntex Agribusiness.
Barbara can be reached at (520) 730-5564 or [email protected]