Login to access your documents and resources.
The client portal are currently unavailable for use on mobile. Please visit the desktop site.
Graffiti wall

Nuveen knows: Upcoming urbanites

Real assets: Tastes and ties between food and cities. Three trends transforming agriculture

 

As the world’s population increases and concentrates in cities, the nature of farming will evolve

While millions of New Yorkers hustle through hectic days amid towering skyscrapers, there are millions of apples, avocados and almonds that must be grown, harvested and delivered to sate their appetites. Farms fuel cities — which is why farms and cities have always had a symbiotic relationship. Cities cannot exist without farms, or vice versa.

Burgeoning cities and shifting consumer tastes are transforming the food ecosystem and the investing landscape. The global demand for food will only increase, which makes farmland a good investment opportunity. Yet, as cities transform, so must farms. How will farms evolve into the modern era?

We support the evolution of farms to be more efficient and technologyenhanced. As the world’s largest farmland investor with agricultural operations on four continents — we’ve identified three key trends that are redefining agriculture investment fundamentals:

Trend #1: The next generation is creating a new generation of farms

The world’s population — currently 7.6 billion — is projected to reach 9.8 billion by 2050. This phenomenon of rapid growth will continue to pressure the world’s farms to produce more food, feed, fiber and fuel — with greater efficiency and profitability. At the same time, experts predict that 68% of the world’s population will live in urban areas by 2050, compared to half of the population today.Among those moving from rural to urban areas are many young people, which has contributed to increasing the average age of U.S. farmers to 59.

Taken together, these trends present institutional investors with the opportunity to play a major role in building tomorrow’s agricultural system. Since young people have less interest in managing farms, farms need to take greater advantage of technology to enable producers to unlock the power of scale. Automation and mechanization, enhanced farm data management, and consistent evolution in farming practices make it likely and logical for farmers to increase their scale. However, investment in new land to achieve scale requires significant capital. Since new land acquisition might not represent the optimal use of the farmer’s capital, it creates a meaningful entry point for long-term, institutional investors.

In addition to capital, institutions bring scale, knowledge and staff expertise to the table. Nuveen, for example, has agronomists, foresters, entomologists, farmers and sustainability experts as part of its team, with the aim of enhancing the value of its farm investments.

Such partnerships may appeal to farm owners who want to keep their farms while also renting additional farms to achieve greater scale economies and to optimize their agricultural equipment. Other farm owners may view partnerships in the context of a succession plan, letting them monetize their land for the next generation — who have moved to the city.
 

Case study: Napa Vineyard: Developing sustainable water management

 
Trend #2: As urbanization reduces the availability of arable land, boosting farmland efficiency is critical

One of the consequences of urbanization is that the development of transportation systems, housing, and commercial and industrial centers can result in conversion of arable land at a time when the need for food continues to rise. Recent research suggests that nearly 33% of the world’s adequate or high-quality food-producing land has been lost in the past 40 years. This is why it’s essential to optimize the production of existing arable land — to produce more food and reduce the pressure on arable land and the resulting pressure for deforestation.

To boost farmland efficiency, Nuveen employs a number of sustainability practices that increase agricultural productivity of our assets over the long term. 

Here are a few of the sustainability practices we measure to help increase productivity:
  • Chemical and production inputs: Tenants use variable-rate or equivalent technologies to apply fertilizers or pesticides efficiently across virtually all of our row crop portfolio (99.6% in 2018).
  • Soil health: Ongoing testing (at least every four years) is conducted to monitor soil health and assess PH and nutrient levels.
  • Water management: Irrigation practices are implemented to conserve water (e.g., drip, sprinkler or laser-leveled land irrigation), particularly in water-stressed regions.

In addition, Nuveen has taken important steps to discourage deforestation, particularly in sensitive ecosystems like Brazil. Deforestation contributes to an estimated 15% of global carbon dioxide emissions. In 2018, Nuveen adopted a Zero Deforestation Policy for our farmland investments in Brazil to discourage the depletion of forested areas and native vegetation.

Trend #3: Urbanites lean toward higher-nutrition, higher-value foods

The rapid growth in urban populations will drive greater demand for food — but what kind of food will that be? Increasingly, as the incomes of urban dwellers rise, they are able to buy foods that both cost more and are more nutritious. For example, urbanites tend to consume less from the grains group (such as wheat and corn) and more dairy and meat. They also consume more prepared foods, which typically carry a price premium. This changing dietary preference, combined with a continued influx of people into cities, will impact every aspect of the food supply chain and create new challenges for delivering foods (particularly fresh vegetables and fruits) into the urban core.

Nuveen is cognizant of these and related trends, and we invest in both farmland and agribusinesses to take advantage of exciting opportunities. For example, the rising middle class is accelerating the demand for “super foods” and clean, healthier protein. Eggs and tree nuts, such as pistachios and almonds, align well with this trend. Accordingly, Nuveen has established itself as a top-five grower of almonds in the United States.

These three trends connect the interests of investors, farmers and consumers — and illustrate the vital role that capital can play in ensuring that the world will have the food it needs, cultivated in sustainable ways, in tomorrow’s world.

Irrigating a typical vineyard requires about 165,000 gallons of water per acre, which is a lot of water for drought-prone California. So, we worked with the Napa Sanitation District to route treated wastewater to vineyards and other locations. The results? 75% reduction in groundwater use and 65% reduction in irrigation costs.

Download Nuveen knows: Upcoming urbanites

Index definitions

MSCI ACWI ESG Universal Index. The MSCI ACWI ESG Leaders Index is a capitalization weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers. MSCI ACWI ESG Leaders Index consists of large and mid cap companies across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. The Index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market. The index is a member of the MSCI ESG Leaders Index series. Constituent selection is based on data from MSCI ESG Research. 

MSCI ACWI Index. The MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. With 2,489 constituents, the index covers approximately 85% of the global investable equity opportunity set. 

Risks and other important considerations 
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. 

Real estate investments are subject to various risks, including fluctuations in property values, higher expenses or lower income than expected, and potential environmental problems and liability. Please consider all risks carefully prior to investing in any particular strategy. A portfolio’s concentration in the real estate sector makes it subject to greater risk and volatility than other portfolios that are more diversified and its value may be substantially affected by economic events in the real estate industry. International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, differing levels of government regulation and tax implications in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments. 

This material is provided for informational or educational purposes only and does not constitute a solicitation in any jurisdiction. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.

This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, certain historical performance information of other investment vehicles or composite accounts managed by Nuveen has been included in this material and such performance information is presented by way of example only. No representation is made that the performance presented will be achieved by any Nuveen funds, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example. 

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Nuveen to be reliable, and not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Company name is only for explanatory purposes and does not constitute as investment advice and is subject to change. Any investments named within this material may not necessarily be held in any funds/accounts managed by Nuveen. Reliance upon information in this material is at the sole discretion of the reader. They do not necessarily reflect the views of any company in the Nuveen Group or any part thereof and no assurances are made as to their accuracy. 

Past performance is not a guide to future performance. Investment involves risk, including loss of principal. The value of investments and the income from them can fall as well as rise and is not guaranteed. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate. Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternative Advisors, LLC, a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.