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21 Aug 2018
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Environmental drivers firing up forestry market
Forestry land, either already planted or suitable for planting, is continuing to rise in value.
Looking at commercial blocks of more than 20 hectares, values have grown by an average of 12 per cent per annum over the last 20 years, according to James Adamson, head of forestry for the UK with Savills.
Speaking to Scottish agricultural journalists, he said: “I do not much like the term but it is difficult to deny that the market is ’hot’.
"In 2019 values increased by 20 per cent and this year until now by another 25 per cent.
"It is pretty amazing to think that good forestry has increased by nearly 50 per cent in two years.”
Nearly mature forest had increased in value from £1,500 per hectare (£607/acre) in 2000, to £5,000/ha (£2,023/acre) by 2010 and now to between £16,000-£17,000/ha (£6,475-£6,880/acre).
“Beyond that there is an unusual aspect to the market. Up until about 10 years ago younger age classes were considered to be almost a liability, but now they are showing strong growth. A two-year-old plantation could now be worth between £6,000 and £8,000/ha,” Mr Adamson added.
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“As far back as the 1980s planting was about tax, then more lately it has been about timber prices. Now it is about the environment and the climate change emergency.
"Carbon offsetting will become one of the most important drivers of value, but the mechanisms are not quite there yet.”
Mr Adamson warned not all land was suitable for planting, with 500 metres (1,640 feet) above sea level being the natural limit for tree growth.
"On the other hand, there is no benefit in planting land that is suitable for arable or suckler beef production. Forestry is a land use for the middle hill,” he said.
As another indicator of financial growth the input land price of forestry being harvested now would have been £375-£500/ha (£151-£202/acre).
In comparison, forests being planted now would have a land input of £3,750-£5,000/ha (£1,517-£2,023/acre), a tenfold increase.
Mr Adamson predicted there was ’plenty of headroom’ for the growth in values to continue and that the potential for forestry would remain a consideration in many land purchases.
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