UK forest values look set to return to growth in 2024

According to the company’s latest Forest Market Review, the outlook for the sector looks broadly positive, with strong demand for good quality commercial forests from a wide range of investors.

“The story of commercial forestry in 2023 does take some unpicking,” said Simon Hart, head of forestry in Scotland at John Clegg & Co. “At first glance the market looks to have cooled significantly as only 2,200 stocked hectares – with a combined price of £45.5m – were sold during the year. This compares with 10,500 stocked hectares, with a combined value of £219m, in 2022.

“However, two large woods, with a total area of 7,600 hectares and a combined asking price of £159m were launched during 2023 and both are now understood to be under offer. If these deals had concluded during the year this would have pushed both the total area and level of investment back to similar levels to last year.”

Mr Hart says higher interest rates might have led to the expectation of a decline in commercial forestry plantation values.

“However, our analysis shows that commercial forests sold for an average of £21,000/stocked ha, which is 1% higher than during 2022 and 45% higher than in 2020. It backs up the prediction we made in last year’s Review that many see forestry as a useful hedge against inflation and therefore it remains an attractive asset.”

Alex Brearley, head of forestry and natural capital for John Clegg & Co, acknowledges that higher interest rates and flat timber prices made buyers more cautious than they were two years ago.

“However, over the past few months, we have seen some upward movement in timber prices domestically, interest rates have stopped going up and inflation is also on a downward trajectory,” he said. “Globally, demand for timber is also forecast to increase substantially as timber usage expands in response to efforts to decarbonise the built environment.”

“The UK governments all have expansionist forestry policies, and we see no reason for the anticipated general election to have much of an impact on the sector as support for tree planting and woodland management is pretty consistent across all parties. Although the Scottish government’s recent decision to cut the planting budget available for 2025/24 is clearly a blow and means failure to meet its own planting targets is now effectively baked into the Scottish system.

“But in summary, we see slightly more upward pressure on prices as we enter 2024, although while interest rates remain relatively high, an element of caution among investors will naturally persist.”

2023 was also characterised by constrained supply, but new opportunities are emerging for both private and institutional investors.

Recent launches from John Clegg & Co include Dalmally Forest - a 221ha second rotation conifer forest in Argyll, with spectacular views of the Scottish West Highlands and close to a well-established road network allowing access to all major timber markets.

The property is predominantly Sitka spruce but with pockets of Japanese larch, Scots pine and an assortment of mixed broadleaves. It is available as a whole for £1.9m or in two lots.

It is also marketing Dunter Law in the Scottish Borders, which is a 93ha second rotation conifer forest also close to established timber markets. This is on the market for offers over £1.15m.

In Denbighshire in Wales, Coed Pen-y-Gelli is a 28ha predominantly mature beech woodland, that offers potential for immediate and significant volumes of accessible timber and an opportunity to diversify its structure. The property is leasehold, but the original term was 999 years, so it is not due to end until 2953. It has a guide price of £290,000.

Other key findings from the 2023 Forest Market Review:

• 20 forests were sold in Great Britain during the 2023 calendar year, compared to a five-year-average of 54.
• 75% of the land sold was in Scotland.
• 60% of the forests sold within six months of being marketed.
• The average selling price was 104% of the asking price.