38 | Sector Focus: UK Forestry
NATURAL CAPITAL ALPHA
Robert Guest, managing director and co- lead at Foresight Sustainable Forestry was a guest speaker at the launch of the FMR and also authored an article in the report. He addressed the subject of sustainable land use and natural capital alpha. Mr Guest said there were several compelling reasons to feel positive about UK forest assets, which have shown strong resilience to financial shocks and inflation. However, the question now was “whether the apparent increase in the risk-free rate must translate into a higher cost of capital for UK land and forestry investment”. “The theory is clear, but participants may
Above: Robert Guest presented on natural capital alpha
have an ace up their sleeves, natural capital alpha,” he continued.
“With excellent, risk-adjusted return
profiles, forestry and afforestation are the ideal entry points for investors looking to enter the land-based sustainable investment space,” he continued in the report. “Freehold ownership and revenues
from the sale of sustainable home- grown timber, as well as tourism, sport, sustainable farming and renewable energy, all provide a strong underpinning.” Mr Guest concluded that, “if you believe
that there is an embedded global supply shortage of sustainable timber and in the concept of natural capital alpha, then this should be a green light moment for the sector”. ■
◄ traded since 2008. However, it’s well worth noting that the market value is now “10 times what it was in the early 2000s”, when the annual average between 2000-2004 was less than £20m.
That increase, said Mr Mahoney, has been driven by high net worth individuals and institutions with a lot of buying power facing constrained supply. He added that this doesn’t look to be changing anytime soon, with interest in forestry assets from institutional investors remaining strong, in spite of the geo-political situation and depressed economy.
He noted that yield class was the biggest indicator of per hectare values, demonstrating
a market that was willing to pay a premium for the best assets.
As detailed in the FMR itself, Mr Mahoney went on to highlight that the average size of commercial forest sold this year was down 21% to 122 stocked hectares (from 155 in 2021) but that the average price paid for a commercial forest was £3.4m – up 10% on 2021 (£3m).
The value of a stocked hectare soared by 46% in the last year, from £19,300/ha in 2021 to £28,100/ha in 2022.
Mr Mahoney noted that the mix changed significantly in 2022, with very few inexpensive properties and a small number of expensive ‘outliers’ being traded, leading to
the conclusion that the like-for-like change in value was actually lower.
When it comes to the spread of sales around Britain, Scotland increased its market share of forestry transactions by value to a dominant 84%. Wales continued to be the second largest contributor to the market value at 13% and England’s share was similar year- on-year at 3%.
The FMR found that observed transactions for land for tree planting also rose – by almost a quarter (23%) from £53.1m in 2021 to £65.3m in 2022, with an average cost of £16,475 per plantable hectare, up 50% on last year’s £11,000. The actual area of land sold for planting was 4,000ha, which was 17% down on 2021.
Once again, Scotland led the charge, with 85% of the plantable land sold, as well as a 73% increase in the average price to £17,200 per hectare.
Above: The expectation is for timber prices to recover and move ahead TTJ | January/February 2023 |
www.ttjonline.com
The total land planted in the UK rose by 4% (13,850ha), with broadleaves overtaking conifers for the first time since 2016. Some 76% of all new planting – and 93% of total conifer planting – took place in Scotland, although at 10,480ha this was still below the annual planting target of 12,000ha. “The net result has been to see more market value but, again, a smaller supply of area,” said Mr Mahoney. “My sense is that we have a land-constrained country and while we obviously believe the most efficient way to produce timber is to plant commercial conifer, we don’t have an over-arching land policy in the UK. “We often hear ‘the right tree in the right place’ but I sometimes worry that that means “no non-native trees anywhere’,” said Mr Mahoney, adding that tight supply and the fact that the UK imports the majority of its
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68
