Commercial forestry values have escalated by at least 15% in the past year, according to a new industry report.
Increasing demand for timber assets, driven by net zero ambitions, contributed to rising prices in a market characterised by fewer, smaller, but higher value sales in 2022.
Scotland “spearheaded the charge for economic forestry”, with an 84% share of UK commercial forestry sales, while the land available for natural capital projects - including native afforestation, peatland restoration and rewilding - also trebled over the past year.
The UK Forest Market Report produced by woodland management company Tilhill and forestry firm Goldcrest Land, estimated the market was worth well over £200m - taking into account a considerable number of off-market sales on top of the £195m monitored by the two firms.
Greater awareness of the benefits of broader natural capital increased interest in opportunities offering wetland, islands and other diversity. The focus on nature-based solutions beyond timber revealed far more land suitable for these projects, swelling to £80.7m, from £26.4m in 2021, based on the data monitored.
England accounted for the largest market share, with £32.4m of listings for 2,500 hectares (ha) of total land area, followed by Wales (£28.9m for 2,100ha) and Scotland (£19.5m across 2,300ha). These listings averaged, per gross hectare, £13,200 in England, £13,600 in Wales and £8,500 in Scotland.
The incentive to protect and replenish natural capital stocks and the appetite for natural services from carbon removal to biodiversity net gain meant forestry and afforestation offered the “ideal entry points for investors looking to enter the land-based sustainable investment space”, according to the report.
Meanwhile, limited supply and the sale of a handful of premium forests in the south of Scotland saw the average value of commercial forestry rise by an estimated 15% over the year. However, the report noted that there were some outstanding “outliers” that achieved sale prices well above this curve.
Xander Mahony, head of forestry investment at Tilhill, said: “Commercial forestry values continue to be driven by increasing demand from institutional investors facing constrained supply - this year in particular has seen supply at the bottom end of the historical range.”
The mixed woodland market - driven by amenity and desirability over economics - grew by 81% in value from £10.7m to £19.4m and in size by 760 acres, with increasing demand outstripping supply.
The report found planting land transactions rose by almost a quarter (23%) from £53.1m to £65.3m, with an average cost of £16,475 per plantable hectare, up on last year’s £11,000.
Scotland led the way, with 85% of the value of plantable land sold north of the border, as well as a 73% increase in average price to £17,200 per hectare.
The total land planted in the UK rose by 4% (13,850ha) with broadleaves overtaking conifers for the first time since 2016. The report noted that 76% of all new planting - and 93% of total conifer planting - took place in Scotland, although at 10,480ha it was still below annual planting targets of 12,000ha.
Fenning Welstead, partner at Goldcrest Land & Forestry Group, said there needed to be major changes in the generation and use of energy and sourcing raw materials.
“To date we have been tinkering around the edges - a future with much greater emphasis on renewable energy and raw materials will surely have to rely more on trees.
“Whatever the vicissitudes along the way the future of human activity will need more timber; we must keep planting.”
Timber was subject to mixed fortunes in 2022, impacted by factors from constrained global supply due to the war in Ukraine and an over-supply of logs in the UK after Storm Arwen forced harvests, to sharp increases in energy demand.
However, while the market saw major falls in the price of standing timber, this came after previously steep price inflation and values now equated to those seen just three or four years ago.
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