Introduction
If you lend money for farmland or rural properties, you’ll notice things are changing in 2025. Buyers are rethinking how they approach land deals. Commercial real estate and agricultural lending are starting to overlap more than ever. Knowing what’s changing can help you make better lending decisions and stay ahead.
Let’s walk through the top CRE trends shaping ag lending this year and what they actually mean for you.
1. Farmland Is on Fire (and Not for Farmers)
Over the past few years, we’ve seen more people trading city life for space, soil, and sunshine. That’s pushed up demand for rural and agricultural land.
CRE investors are starting to treat farmland the same way they’ve treated urban properties: as a serious long term asset. What’s changed? Cap rates, buyer profiles, and the value drivers.
| Category | Urban CRE | Agricultural CRE |
|---|---|---|
| Cap Rates | Around 5.5 percent | Between 7 and 9 percent |
| Buyers | Mostly institutional investors | Mix of institutional and private buyers |
| Value Drivers | Foot traffic and urban growth | Water rights, soil quality, and crop yields |
Why it matters:
- Ag land near cities is rising in value fast.
- New types of buyers, including tech-backed funds, are flooding in.
- That competition is driving tighter margins and more complex loan terms.
- You’ll see more requests for long term, fixed-rate loans to lock in favorable rates.
2. Sustainable Lending Isn’t Optional Anymore
Gone are the days when ESG was just a buzzword. In 2025, it’s part of how CRE lenders underwrite deals — and ag land is no exception.
Here’s what we’re seeing:
- Farms using regenerative practices, water-saving systems, or solar get better loan terms.
- Some banks now require ESG scores during underwriting.
- Green loan products are gaining traction, especially in California and the Midwest.
If a farm uses sustainable practices, it may qualify for better loan terms. Lenders who offer these options will be in a stronger position to compete.
3. AgriTech Is Changing the Way We Value Land
Appraisers assess farmland using tools like drones and soil sensors.
What’s new:
- Tech-optimized farms with smart systems are appraising higher.
- Insurance costs are dropping for farms using advanced tools.
- Venture capital is entering the space, especially for data-driven farms.
Lenders now use digital performance data along with traditional land appraisals.
4. Creative Deal Structures Are Gaining Ground
Farmland financing isn’t just USDA loans anymore.
More buyers are asking about:
- Crowdfunding platforms
- Fractional farm ownership
- Tokenized farm equity
- Crypto-backed ag loans
You’ll also hear terms like leasebacks and shared equity agreements more often. If you’re not ready for these conversations, borrowers might go elsewhere.
5. Appraisers Are Using Smarter Valuation Models
Appraisals aren’t just about comps anymore. CRE methods are now used in ag lending too.
| Method | In Urban CRE | In Agriculture |
|---|---|---|
| Income Approach | Retail, Office | High-value crop farms |
| Cost Approach | Industrial | Equipment-heavy farms |
| Comps | Multifamily | Pasture, row crop land |
What this means:
- Lenders will start seeing higher valuations for income-generating farms.
Lenders now use satellite images, farm tools, and past results to help value land. For an overview of how land evaluation works, check out the USDA’s Land Evaluation and Site Assessment (LESA) Guide.
6. Zoning and Compliance: The Hidden Deal Killers
Some investors buy rural land, then run into zoning rules they didn’t know about.
Things to look out for:
- Delays from unclear land use laws
- Restrictions on foreign or non-ag use
- Protected zones like wetlands or floodplains
Lenders who understand local zoning — or offer legal support — will stand out in 2025.
Bonus Tip: Use USDA zoning tools to assess land before issuing term sheets.
7. Hard Money Ag Loans Are Gaining Popularity
Some investors use private lenders to get money fast, even if the rates are higher. They plan to refinance later with a lower-cost loan.
| Feature | Traditional Farm Loan | Hard Money Ag Loan |
|---|---|---|
| Interest Rate | 4–6% | 8–15% |
| Approval Time | 3–6 weeks | 5–10 days |
| Use Case | Long-term buy and hold | Flip, reposition, bridge |
Private lenders offer quick financing with higher rates, which is a good option for investors who plan to refinance in a year or two.
8. National Policies Are Hitting Local Lenders
Shifts in subsidies, rates, and grants are changing who can get a loan and what the terms are. You can see projected changes in farm income in the USDA’s 2025 Farm Sector Income Forecast.
Stay ahead by:
- Monitoring USDA and Federal Reserve updates
- Building relationships with local ag officials
- Helping borrowers qualify for state or federal programs
- Watching for changes to capital gains and estate tax laws
The best lenders in 2025 will do more than approve loans. They’ll guide borrowers through changing rules and programs.
Wrapping It Up
Lenders who stay ahead will have the best chance to grow and work with stronger borrowers.
Want to learn how Private Capital Lenders can help you structure smarter farm loans in 2025?
