48 | Sector Focus: UK Forestry
SUMMARY
■A total of £200.4m-worth of commercial forestry properties were traded in 2021
■The value of a stocked hectare has risen by 21%
■Timber prices are a driver for the rise
■Younger forests are achieving the highest unit values
VALUE PROPOSITIONS
The UK Forest Market Report highlights the new factors driving the underlying value of commercial forestry. Sally Spencer reports
The forestry market has seen a record- breaking year, 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 (FMR). The annual report, produced by John Clegg & Co and Tilhill, is now in its 23rd year and is regarded as the most comprehensive publicly available record of forestry transactions in the UK. The data series now incorporates 1,909 transactions, which total some £1.6bn and 299,000 stocked hectares (ha).
The FMR was launched at in-person events and online on November 23 in London and November 24 in Edinburgh.
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.
This year the report 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. The market size of commercial forestry (defined as forests with at least 20ha of stock conifers only) has remained roughly stable, although “technically”, said Peter Chappell, head of forestry investment at Tilhill, 2021 is “very slightly up” from 2020 and therefore a
record-breaking year, with a total of £200.4m of forestry properties traded. “We have seen 67 properties traded, slightly up from the 61 we saw last year, although it should be noted that it is down from the long term average, which is closer to 80.” Scotland saw the lion’s share of transactions, accounting for 76%, while Wales and England accounted for 22% and 2% respectively. Mr Chappell noted that Wales’s share of transactions was usually 5-10%, so this year may represent “an interesting shift”. Looking at the three countries together, Mr Chappell said the stocked area traded this year was notable – down from 12,500ha in 2020 to about 10,400ha. “That is the smallest amount we have seen traded since 2012 and is 17% down from last year.” He added that, clearly, if the total market size had remained the same despite the lower amount of forest traded, then this year’s value increase had been “substantial”. “It was just under £16,000/stocked ha last year [up from £9,300 in 2018] and it’s gone up to around £19,300 this year – a rise of 21%/stocked ha.”
This follows a 39% increase in 2020 and a 23% increase in 2019 – so a 107% increase in values since 2018.
There were three main drivers for this rise, said Mr Chappell. The first is the supply and demand imbalance, with supply at its lowest “for a long time”. The second driver is rising timber prices.
Above: Rising timber prices have underpinned investor confidence PHOTO: TILHILL TTJ | January/February 2022 |
www.ttjonline.com
“This firming of timber prices is also running alongside a wider recognition that the long term outlook for timber is extremely positive,” said Mr Chappell. “Many commentators have alluded to the fact that timber is a global commodity, that long term we are seeing global population rise, we are seeing a megatrend of a drive to use
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