Wednesday, November 27, 2024
The UK forestry sector has demonstrated resilience in 2024, navigating economic challenges while maintaining strong demand for quality assets, stable timber prices, and growing interest in natural capital projects. According to the UK Forest Market Report 2024, jointly produced by BSW Group’s Tilhill Forestry and Goldcrest Land & Forestry Group, the industry remains robust despite a cautious market environment.
The report, launched in Edinburgh on 19 November and London on 20 November, offers the most comprehensive analysis of the UK forestry sector, covering financial trends, regional insights, and emerging investment opportunities.
Market Overview: Resilience Amid Economic Challenges
In 2024, £95.4m worth of forestry was listed for sale, a 55% decrease compared to the previous year. This included 44 properties covering 5,400 stocked hectares, with an average valuation of £18,600 per stocked hectare. Scotland maintained its dominance in the market, accounting for 79% of sales.
Despite a drop in agreed deal prices, the market remained resilient, with high-value northern Scotland properties—typically lower in price due to their distance from core timber markets—skewing overall averages. Adjusted valuations showed like-for-like stability, reflecting a healthy market recalibration after years of steep increases. Investor sentiment was cautious but steady, with expectations of greater opportunities in 2025 as high-value properties enter the market.
The report posed an important question for the future: “Might the new government’s drive for more construction provide both a demand for timber and have a knock-on effect of reducing the nationwide resistance to land use change?”
Planting Land: Demand Outpaces Supply
Scotland saw a 40% drop in the volume of planting land for sale, with 1,600 hectares available as supply remained tight. Prices stabilised at £10,000 per gross hectare despite sustained demand.
In England and Wales, planting land availability rose sharply—up 92% in both regions. England listed 1,600 hectares at an average of £14,500 per hectare (a 13% decrease), while Wales listed 1,300 hectares at £16,800 per hectare (a 26% increase).
“The heat has come out of the market but demand for planting land definitely still outstrips supply, which has been greatly reduced over the last 18 months,” the report observed.
Sustainability: Addressing Environmental Pressures
The report emphasised the critical importance of good silviculture practices and species diversity for the future of the forestry sector. Sitka spruce remains the dominant species, but environmental challenges—including droughts, pests, and climate change—underscore the need for improved forest management. Effective practices focusing on sustainability, biodiversity, and resilience are essential to maintaining the sector’s long-term health.
Carbon Credits and Natural Capital: Emerging Opportunities
The woodland carbon market is at a critical juncture, with rich opportunities expected over the coming years. Projects delivering ecological benefits such as biodiversity and water quality improvements achieved carbon credit prices 2-3 times higher than standard rates, highlighting the appeal of sustainable investments.
Properties with natural capital opportunities in England rose by 16% to £14,500 per hectare, potentially reflecting the impact of Biodiversity Net Gain (BNG) regulations. Meanwhile, such land in Scotland dropped 44% to £3,100 per hectare due to a few lower-priced highland estates. In Wales, natural capital land rose by 7% to £18,100 per hectare.
Timber Market: Stable Demand Drives Growth
The UK timber market remains stable, supported by strong demand for small roundwood and pallet wood. Timber fibre also continued to see steady demand at consistent prices. With trees growing at 5-6% annually, forestry land offers inflation-resistant investment opportunities.
Expert Insights: Resilience and Optimism
Xander Mahony, Head of Forestry Investment at Tilhill Forestry, highlighted the sector’s strength: “This year’s report shows a resilient yet evolving UK forestry sector, where, despite investor caution, there is strong demand for quality assets. Stable timber prices, recovering interest in natural capital projects, and the rise of biodiversity regulations are driving growth.”
Jon Lambert, partner at Goldcrest Land & Forestry Group, echoed this view, noting that buyers were “somewhat cautious and selective,” particularly leading up to the Labour Government’s first Budget. He pointed out that land and forestry investments retain strong appeal.
“We have definitely seen a mature market buying forest assets that is focused on growing timber, a global commodity in short supply, with taxation incentives being less of a driver,” he added.
Future Outlook: Opportunities in 2025
Looking ahead, the UK forestry sector is poised for further growth in 2025, with high-value properties expected to energise the market. As species diversity, sustainability, and natural capital projects gain prominence, the sector remains a cornerstone of resilient and forward-thinking land investment strategies.
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