UK forestry market sees 'record-breaking year'

The sector is attracting unprecedented levels of interest from commercial forestry buyers and financial institutions
The sector is attracting unprecedented levels of interest from commercial forestry buyers and financial institutions

The forestry market has seen a record-breaking year, with average values more than double what they were three years ago, according to a new report.

The annual UK Forest Market Report, produced by John Clegg & Co and Tilhill, is regarded as the most comprehensive record of forestry transactions in the UK.

Forests are seen as critical to growing the UK's low carbon economy, which is why, alongside natural capital factors, companies and funds are keen to invest.

This year the report highlights that 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 (ESG) considerations or natural capital outcomes.

The report shows that this year alone, a total of £200.4 million worth of forestry properties were traded, making it another record year for the sector.

This year it includes a new section on the market for planting land, which shows an additional £53m worth of land suitable for afforestation transacted, plus £26m worth of natural capital land.

Key findings include 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, the report says.

The total value of the forestry market was £200.40m in 2021, just over the £200.18m in 2020, with 70 planting land deals also struck worth £53m.

Scotland provided the largest share of commercial forest market, at 76% by value, according to the report.

Peter Chappell, head of forestry investment at Tilhill, said it was an 'exciting time' to be in the UK 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 £9,300 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.

Mr Chappell said: "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.”

This year is the first year that the report examines the dynamics of the market for planting land.

It is estimated that the total area of planting land purchased has risen from 4,460 hectares in 2020, to 6,480 hectares in 2021.

The report tracked 70 planting land deals across Scotland, England and Wales in 2021, compared with 33 in 2020.

The average price per gross hectare was £8,500, up from £6,200/ha in 2020. This equates to a figure of £11,000 per plantable hectare in 2021.

The UK Forest Market Report also tracks transactions for mixed woodland sales over 10 hectares in size.

Broadleaved woodlands can vary greatly in value with location, look and feel being significant factors, making it a far more subjective market than commercial forestry.

Values have continued to rise in 2021, with demand outstripping supply in what is a small, but strong, market.

England dominates the mixed woodland market accounting for £7m of the 2021 UK sale total of £10.7m.

The average price in England in 2021 was £6,170 per acre, up from £5,330 in 2020.

However, average values do mask a huge variation in values – the range in prices being paid in England during 2021 was £2,000 to £11,400 per acre.

Edward Daniels, head of forestry at John Clegg & Co, said: “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."