John Clegg & Co: Forestry investment hitting record highs

John Clegg & Co’s Forest Market Review 2022 highlights that activity levels remain high within the commercial market, but over the past six months buyers have started to become more selective.

A total of £219 million-worth of plantations traded hands last year, which was up on 2021's £199m. However, forests sold for an average of £20,800/stocked hectare in 2022, 22 per cent lower than the previous annual figure. 

READ MORE: Still on steady ground? Taking a closer look at UK Forest Market Report 2022

Alex Brearley, head of forestry for John Clegg & Co, said: “The 2022 market continued to see examples of very high prices being paid for large, young, second rotation woodlands. Such sales were characterised by very high growth rates, good infrastructure and easy access to markets. 

“In contrast, falling timber prices resulted in a drop in prices for less attractive, more mature woods where timber sales were imminent.

"There are plenty of investors with money to spend on woodland, but it has to be on the right product.” 

Reports of the forestry market's 'demise' have surfaced in recent months. The UK Forest Market Report for 2022 - released late last year - found a total of £195 million of commercial forestry was sold in the UK, down on 2021’s £200.4m (by three per cent). At the time, officials warned global factors, including the war in Ukraine, were likely to have an impact on the market during 2023. 

John Clegg & Co’s review shows that 59 forests were sold in Great Britain during the 2022 calendar year, which is more than during 2021 but slightly below the five-year average.

Scotland took its normal place as the principal area of activity with well over 90 per cent of all sales taking place north of Hadrian’s Wall.

The average asking price/hectare was over £15,000 for the first time on record, and over £18,500/stocked hectare. The majority of forests sold for above their asking price.

Around 56 per cent of forests sold within six months of being marketed, slightly below the five-year average, but still a sign of the continuing strong demand for forestry as an asset class. 

Simon Hart, head of forestry in Scotland for John Clegg & Co, said: “There is an abundance of buyers looking for commercial plantations, in a market lacking supply. 

"The total value of investment in 2022 was £219m, but there was at least the same amount of capital available to invest in forestry that could not be placed during the year.

Simon Hart (Image: FJ)

“We continue to see an intrinsic link between timber prices and plantation values, and demand for good quality existing plantations remains as strong as ever. It is also anticipated that timber prices will rise slightly in 2023, supporting the returns that plantations can generate from timber sales and bolstering confidence in plantations as an asset class.”

Other key findings in the report include:

• There is some evidence that commercial planting land prices have fallen quite significantly in the past six months. However, the data is limited and so it is not yet clear where the market has landed. This probably reflects changes to the rules on eligibility for carbon credits for commercial forestry schemes, higher interest rates and the challenges of securing permission to plant.
• Interest in carbon sequestration and biodiversity gain continues to drive wider interest in the forestry sector, but very few of the commercial woodlands traded in 2022 had a carbon angle, and wider biodiversity is yet to be monetised.