It wasn’t long ago that the type of infrastructure and building projects we are seeing today were far more common. Think the Industrial Revolution, or the boom during World War II. Factories and manufacturing plants weren’t just in major cities; they also were spread across small towns and regional hubs throughout the country.
Over time, that changed. Beginning in the late 1970s and accelerating through the ’80s, ’90s and 2000s, globalization, outsourcing and improved logistics started to shift a significant portion of that manufacturing base overseas.
What had been a widespread part of rural and small-town economies slowly thinned out over several decades.
Present day
Enter data chips, Amazon warehouses and artificial intelligence data centers. Things have changed again. Land on the outskirts of rural cities throughout the countryside is being reshaped. Brown sites, as they are often called, are being redeveloped. Land in these areas that once sold for farmland values is now selling for hundreds of thousands of dollars per acre in some cases.
One recent estimate suggests some of these large AI and tech-driven projects are paying somewhere in the range of $200,000 to $300,000 per acre in select locations. That’s generational money. It’s also estimated that there are about 5,000 data centers either planned or under construction across the U.S.
That does not even account for chip plants, Amazon distribution centers and other major construction projects that demand land, labor and capital.
So, where does that put farmland? It certainly makes it more desirable. Even before this recent wave, we already were losing about 1 million to 1.5 million acres of farmland per year to urban sprawl and development. Think housing, strip malls and general city expansion. Now layer in large-scale industrial and tech development.
That only accelerates the scarcity we already see in farmland. The idea of “they aren’t making any more of it” starts to feel a lot more real.
It also impacts values. If a neighboring tract of farmland that might otherwise sell for $10,000 per acre brings $50,000 or more to host a data center, that absolutely helps support the value of surrounding land. Not only that, but power companies and utilities often need to acquire additional land nearby to build out infrastructure to support these projects.
There also are secondary opportunities for nearby landowners. Maybe their land turns into a truck stop, a substation for a utility provider, a water treatment facility or some other supporting use.
Large projects rarely exist in isolation. They tend to pull development along with them. Roads get improved. Power gets extended. Water access changes. All of that matters.
If you happen to own land nearby with something like gravel or other usable resources, that land becomes significantly more valuable as well. A multibillion-dollar project down the road has a way of changing what people are willing to pay for everything around it.
Equity unleashed
When these types of sales happen, they unlock equity that has been sitting on balance sheets for decades. A lot of farm families and landowners are “land rich and cash poor,” or somewhere in between. I use the word “poor” loosely, but the point stands. They often hold significant wealth in land, not liquid cash.
After a major sale, that changes quickly. Generational equity and wealth move into the marketplace. And with that comes tax considerations. If land was purchased at $500 per acre 40 years ago and sold today for $50,000, the capital gain is significant.
Fortunately, the tax code allows for deferral through reinvestment via a 1031 exchange. Because many of these landowners are already comfortable owning land or see it as a long-term asset, that money often flows right back into the land market.
That creates a new layer of demand. When millions of dollars, and sometimes tens of millions, are redeployed into land within the same region, it introduces buyers who simply did not exist before. These are highly competitive buyers, and they are often motivated by investment, tax strategy or end-use to farm or ranch.
What it means
What does this mean for landowners? If you are not selling, it generally means your equity position is stronger. It is another data point that supports long-term confidence in farmland values. From my view, and for this reason among many others, land likely continues to appreciate over time. In certain areas, it could be fairly aggressive.
If you are selling or exiting, it creates a demand environment we have not seen in quite some time. It is not just farmers looking to expand. You now have a different class of buyer in the market, often looking to reinvest and defer taxes, which adds another layer of competition to an already tight land supply.