The value of UK commercial forestry fell by 10-20 percent in the 2022-23 year as the financial downturn created a market populated by “more cautious” investors, revealed the Tilhill and Goldcrest Land & Forestry Group annual report.
Land prices for commercial forestry in Scotland fell by 22 percent from £12,800 ($16,000; €14,600) per gross ha in 2021-22 to £9,900 this year – Scotland represents the bulk of the UK forestry market, accounting for 91 percent of all sales in 2022/23.
“Purchasers are generally more cautious than 12 or 18 months ago, leading to longer due diligence periods, an increased demand to rectify ‘blemishes’ before completion and a desire for higher yields,” said Goldcrest partner Jon Lambert.
“It is clear there is money in the system and demand outstrips supply. Buyers are searching, watching, and waiting, ready to jump on an opportunity. However, they are more cautious and increasingly selective.”
The report found that although commercial forestry listings were up 9 percent to £212 million, “an extraordinary 70 percent of the total value listed for sale” came from two large properties in Scotland.
Listings for planting land were down 24 percent at £49.9 million and mixed woodland listings were down 18 percent at £15.8 million.
Land listings for natural capital provided the biggest positive data, with the value of land listed rising 241 percent to reach £276 million.
The report characterizes natural capital land as “any land with a designation such as a national park or SSSI [Sites of Special Scientific Interest], that isn’t predominately used for growing cereals or vegetables and isn’t subject to long term tenancies. The resulting land is suitable for native afforestation, peatland or biodiversity restoration.”
Average carbon credits prices from British forestry continued their upwards movement, rising from £14.94 in 2021 to £25.36 in 2023.
“Efforts to quantify and evaluate the additional ecological, social, hydrological etc, benefits of woodland carbon projects are likely to be a defining feature of the market’s future development,” said David McCulloch, head of CarbonStore, who contributed to the report.
McCulloch cited the growing disparity between the highest and lowest price paid for a forestry-derived credit in the UK, which increased from £27.76 in 2021 to £37.50 in 2023, as a reflection of the “efforts by certain brokers to emphasise the ancillary benefits of a specific woodland.”
“For example, in addition to capturing carbon, it may also deliver significant improvements to the neighbouring ecology. For a company that has purchased the PIUs [Pending Issuance Units] from this woodland (and implicitly supported its creation), the ecological benefits provide a valuable marketing opportunity which landowners need to leverage.”