UK commercial forest values have surged 34% in 2011 despite the stagnant economy and wider European economic concerns, according to a new report.

The Forest Market Report 2011, published by UPM Tilhill and Savills, shows an average forest value of £4,650 per stocked hectare being attained – 34% or £1,174 up on 2010 and the highest level since the report first started.

This is equivalent to an annualised increase of 13.7% since 2003.

“Optimism is clearly strong and overall the market is rising, backed by clear investor confidence and strengthening timber prices,” said George McRobbie, forestry operations director for UPM Tilhill.

Though future demand for timber is a driver for prices rising, the report also says the Renewable Heat Incentive’s support for biomass energy projects will also increase demand for wood fuel, while wind turbine projects and hydro-electric schemes are offering increasing opportunities on forest properties.

“The current levels of growth have taken place in spite of an ailing construction sector,” said Savills/UPM Tilhill.

“Looking to the longer term, as economies start to recover and development activity increases, demand for timber both as a fuel and construction material can only increase.”

The forest values growth comes on the back of a 20% increase in the IPD UK Forestry Index in the year to December 2010, while the Forestry Commission figures show the coniferous standing timber sales price was up by more than 70% in the five years to September 2011.