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• 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.
KEY FINDINGS:
• The total value of the forestry market was £200.4m in 2021 (just over the £200.18m in 2020), with 70 planting land deals also struck worth £53m.
• 10,400ha (gross) of forestry traded in 2021 (67 forests), compared with 12,500ha in 2020. • Decrease in average size of a property sold from 206ha in 2020 to 155ha this year. • Scotland provided largest share of commercial forest market at 76% by value.
sustainable building materials and, over time, we are seeing more technologies drive the demand for timber.”
The third driver is the prevalence of second rotation forests in the market. According to Tilhill’s data, second rotation forests formed around 10% of the market in 2019, in 2020 it went up to around 20% and this year it was closer to a third.
“The report highlights how the trend of younger forests achieving the highest unit values has continued into 2021,” said Mr Chappell. “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.” One reason given for younger forests’ higher value is that using improved Sitka spruce (ISS) “there is clear evidence that the yield classes on the second rotations are higher than they were on the first,” said Edward Daniels, head of forestry at John Clegg & Co.
“With volumes higher and timber prices higher it can mean that we are talking about a 200% increase in value that a hectare of commercial forestry can yield,” he continued. “A hectare of ISS can yield up to 600 tonnes, rather than the 400 tonnes per hectare it might have done with Queen Charlotte Island (QCI) Sitka spruce. If the timber price is 100% higher than it was – say £150 per tonne – you can easily see how a 200% increase in timber value is possible. “As further improvements are made to seed stock and if the timber price continues to strengthen, you can see hectares of standard commercial forestry yielding up to 700 tonnes per hectare,” said Mr Daniels.
PLANTING LAND
It is the first year that the report examines the dynamics of the market for planting land, although interpreting trends is not without its challenges. While John Clegg & Co can track land it thinks, on the whole, is suitable
for afforestation, it doesn’t always know if woodland creation will be the final land use. However, it is estimated that the total area of planting land purchased has risen from 4,460ha in 2020 to 6,480ha in 2021. Some 70 planting land deals were tracked 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.
MIXED WOODLANDS
The FMR 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. Mixed woodlands of less than 10 hectares are not covered by the report so the figures are not overly skewed by the sale of very small blocks of woodland, which in the right locations command a significant price premium.
ASSET MANAGEMENT
The report carries a guest contribution from Stuart Dobrijevic, asset manager for Abrdn (formerly Standard Life), who writes about how the business is committing capital to ‘nature-based solutions’, which will help to tackle climate change. Mr Dobrijevic also spoke at the launch events.
An Abrdn-managed fund has already bought an area of about 1,400 hectares in the Cairngorms National Park where large- scale native woodland creation and peatland restoration will take place. Mr Dobrijevic reported that 1.5 million trees will be planted. Dan Ridley Ellis, head of the Centre for
Wood Science and Technology at Edinburgh Napier University, also spoke at the events and contributed to the report. He considered what the outlook is for the forests that are being planted now, suggesting how the possible uses of forests and forestry products may change in the decades ahead. This year’s report also includes an article exploring the factors influencing prices for woodland carbon, now and into the future. The FMR is resoundingly positive, with data underlining Peter Chappell’s conclusion that “It is an exciting time to be in the 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. “2020 was an extraordinary 12 months in the forestry sector, but 2021 has more than matched it,” added Edward Daniels. “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.
“Forests are seen as critical to growing the UK’s low carbon economy, which is why, alongside ESG and natural capital factors, companies and funds are so keen to invest. While there are those who would argue that rising values are a result of short-term supply and demand dynamics, it is our belief that the underlying worth of commercial forests is increasing because of the positive long-term outlook for timber prices, carbon income and other ecosystem services payments. The signs are extremely positive for the woodland and forestry sector, with further growth in forestry values a real possibility.” ■
FURTHER INFORMATION The UK Forest Market Report
can be downloaded from the Tilhill or John Clegg websites
www.ttjonline.com | January/February 2022 | TTJ
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