It has been a record-breaking year for the forestry land sector, with average values more than double what they were three years ago and the total value of the forestry investment market reaching a new high, according to the latest UK Forest Market Report. Source: The Scottish Farmer
According to the annual report – produced by John Clegg & Co and Tilhill, and now in its 23rd year – the sector is attracting unprecedented levels of interest from commercial forestry buyers and financial institutions.
Some are experienced forestry investors, but others are new market entrants with multiple objectives, part financial and part related to Environmental, Social and Governance considerations or natural capital outcomes.
In 2021, a total of £200.40 million of forestry properties were traded, making it another record year for the sector. An additional £53m worth of land suitable for afforestation transacted, plus £26m worth of natural capital land.
There was a 21% increase in forestry values from just under £16,000 per stocked hectare in 2020 to £19,300 per stocked hectare in 2021. However, the spread in prices paid is wide, with significant geographic and quality variations.
Head of Forestry Investment at Tilhill, Peter Chappell, said: “It is an exciting time to be in the forestry sector. The positive long-term outlook for timber values has buoyed confidence in how commercial forests can perform as an investment and the wider benefits of trees and woodland to society and the environment are being increasingly recognised. The growth in the value of an average stocked hectare has continued unabated, rising 21% this year. This means over the past three years, values have risen from £9300 in 2018 to £19,300 in 2021.
“The report also highlights how the trend of younger forests achieving the highest unit values has continued into 2021. This shows investor confidence in timber values, and the fact that younger, second-rotation forests tend to be characterised by high yielding, improved varieties of Sitka spruce, with proven timber extraction and a developed infrastructure. There is also some evidence that larger forests over 100ha are now attracting the highest per hectare values as an increasingly competitive market develops for high value deals.”
Head of Forestry at John Clegg & Co, Edward Daniels, added: “2020 was an extraordinary 12 months in the forestry sector, but 2021 has more than matched it. Timber prices have remained high, plantation values are breaking new records and large institutional investors such as pension funds and other new entrants are allocating more capital to sustainable investments than ever before.
“Forests are seen as critical to growing the UK’s low carbon economy, which is why, alongside ESG and natural capital factors, companies and funds are so keen to invest. While there are those who would argue that rising values are a result of short-term supply and demand dynamics, it is our belief that the underlying worth of commercial forests is increasing because of the positive long-term outlook for timber prices, carbon income and other ecosystem services payments. The signs are extremely positive for the woodland and forestry sector with further growth in forestry values a real possibility.”
