Above: Timber species remains fundamental to any buying decision
The report authors revealed that forestry worth almost £100m was listed for sale in 2024 in a market characterised by tight supply and buyer caution. The UK forestry sector had proved resilient in the face of economic challenges, they concluded, adding that the market remains strong, driven by demand for high-quality assets, stable timber prices, wider natural capital projects and a positive medium-term outlook for wood being used as a substitute for high carbon materials. Xander Mahoney, head of forestry investment at Tilhill Forestry gave the headline figures which, on the face of it, look pretty gloomy compared to 2023 – but it’s all about context. “We thought there had been a steady flow of multi-million-pound properties coming to the market this year and then we added them all up and we were down by more than half. What gives?”
He went on to explain that the 55% fall in the value of listings in 2024 (down to £95.4m) was largely due to the sale of two exceptional properties in 2023, which accounted for £150m worth of value and skewed the figures for that year somewhat.
“Stripping them out and focusing on the more typical properties, we’re actually up by 80% and that trend has continued into the coming year, with multiple large assets either on the market or, as we understand, imminently coming to market,” said Mr Mahoney. The market numbered 44 properties (a 26% increase on last year), with a total of 5,400 stocked hectares (down 39% on last year) and an average valuation of £18,600 per stocked hectare (an 18% decrease from last year).
Scotland continued to dominate, with a 79% market share.
The 18% drop in the pricing of agreed deals can also be explained by “outliers and northern skews”.
“Last year there was a big deal done at a valuation 30% higher than anything else that year,” said Mr Mahoney. “And this year there was an island property that was done at a valuation of half the next cheapest property.” He added that if those two deals were stripped out of the data, like-for-like valuations were down by 8%. Some commentators have referred to that as “close to flat”.
Mr Mahoney went on to say that Tilhill and Goldcrest had noticed a big swing towards northern Scotland properties in 2024. “We believe this is because, with higher interest rates, investors are looking for near- term income and many of the properties further south, where the trees grow faster, have already been harvested. We would expect that more mature properties would fetch a higher valuation, however, these northern Scotland properties are further from the core timber markets, so, as a group, the more mature northern Scotland properties were still the lowest value region overall. “This has also dragged down valuations, so between the outlier effect and the northern skew we believe there is support for our assertion that like-for-like valuations are down by a mid-single digit percentage at most,” said Mr Mahoney.
He added that the “biggest determinant of valuation – the most highly correlated variable” was the proportion of Sitka spruce on a property.
The report highlights the fact that while pricing has stabilised for commercial afforestation land in Scotland, the availability of land has continued to shrink. In Scotland the volume of land available for sale dropped by 40% to 1,600ha as availability of land suitable for commercial forestry continued to tighten, despite sustained demand. Pricing for land stabilised at around £10,000 per hectare. In Wales, planting land increased by 92%, to 1,300ha and averaged £16,800 per gross hectare (26% up).
The report notes that Wales has shown an uptick in potential investment opportunities, but many are smaller and higher priced. Larger Welsh landholdings are more attractively priced but are few and far between, it says.
Planting land listed in England also increased by 92%, to 1,300ha, and averaged £14,500 per gross hectare (13% down). “The desire to diversify outside of Scotland
and Wales is driving activity in England, despite the regulatory challenges,” said Mr Mahoney. “The pricing is somewhat skewed by a property in the Midlands, outside of the typical conifer region, but it illustrates the affordability challenge of land south of the border.”
The report says that the heat has come out of the market but that demand for planting land definitely still outstrips supply, which has been greatly reduced over the last 18 months. In summing up, Mr Mahoney told delegates that “there is more opportunity to deploy capital into UK commercial forestry right now than at any point in the past decade”, adding that “afforestation ►
www.ttjonline.com | January/February 2025 | TTJ
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