UK forestry investment market records unprecedented capital growth
During the 2021 forest year (12 months to September 30 2021), the UK forestry investment sector total market value increased to £262.7 million, representing a 23 per cent rise in aggregate sales value compared to 2020.
This growth, according to analysis by Savills published in its annual report Spotlight: The Forestry Market, correlates with society’s changing interest in the way the environment, and investment classes that can be linked to it, are perceived.
Market analysis shows the average gross value for forestry sales increased by 39 per cent to average just over £15,000 per hectare during 2021, however, the price per net productive (conifer) hectare rose by 61 per cent to average £23,720. The strong overall growth was, however, driven in part by the high quality of some of the assets in the sample, and it is notable that the range in prices paid for forests has widened.
The relationship between the productivity of a forest, or the ability to improve that productivity over time and the price paid is very apparent, especially for what are considered ‘best in class’ assets. These tend to be large scale, high yield class forests in areas of competitive timber marketing. Growth in values has not be even across the UK, and the individual attributes of a property must be considered in each instance.
The research has also showed the gap between gross value and the value of the productive area of the forest is widening as the market prices in potential future upside timber performance. During the 2021 forest year, the difference was 55 per cent, which compares to an average difference of 34 per cent for the preceding 10 years. This is a result of very strong unit pricing for conifer stands, especially for mid-rotation timber, where there is a strong expectation of considerably better pricing as the demand for low carbon homes and timber utilisation in construction manifests over the next 20 years.
At a regional level, average values are highly dependent on a number of variables such as location, access, species, age and timber volume. Overall, values during 2021 were highest in the regions of south Scotland and England and Wales at £29,163 per net productive hectare and £29,985 per net productive hectare respectively, continuing the trend of previous years.
Tim Williams is associate director in the forestry team at Savills in the West Midlands
