Spotlight:

UK Forestry Market

UK Forestry Market
A multi-purpose investment

22 March 2017, by Savills Research & Scottish Woodlands

Despite a smaller market size, UK forestry has continued to demonstrate strong performance and remains a highly desirable alternative asset class

Investors are increasingly seeking multi-purpose investments, ones that hedge against uncertainty and provide a long-term home for capital.

Forests provide an ideal vehicle for this, combining the benefits of land acquisition with the profitability of producing a valuable commodity.

 

The market size in 2016 was much smaller than 2015, but slightly higher than recent trading averages. Demand continues to be strong and remains thwarted by the availability of investment grade property.

Our market analysis shows where available prime Sitka spruce forests with strong production forecasts continue to dominate the headlines. There was also a noticeable distillation of value into more peripheral market areas as purchasers sought to make the most of available opportunities.

Timber prices fell from the highs of mid-2015 through to early 2016 before rising again into the summer, and currently sit at similar levels to 2014.

This had limited impact on the market, as the accepted position is that timber prices have scope to rise considerably over the medium to long term due to exchange rates and increasing demand for wood fuel, together with Government policy which is firmly behind the construction industry.

New planting

One of the most buoyant market sectors in 2016 was the purchase of agricultural land for new woodland creation, driven in part by a shortage of quality stocked woodland property on the market.

The market for upland farms is significantly influenced by the potential for afforestation, which can often be quite black or white.

To be attractive to investors, land parcels should be capable of at least 60% plantable area, have good access and be in a reasonably sized parcel; if these criteria are met, there is likely to be a premium offered over base agricultural values, but if not, there is likely to be no forestry interest at all.

Articles from Spotlight: UK Forestry Market 2017

Forest values remain diverse

2016 proved to be an average year for UK forestry, in terms of transactions and values

Demand for timber primed for growth

Innovation in the structural timber frame industry can lead to increased demand from housebuilders

A step change in new planting ambition

We are potentially witnessing the best period for forestry expansion since the 1970s and 1980s

UK forestry outlook

22 March 2017

UK forestry outlook

Forest values will continue to rise

 
 

Key contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Nicola Buckingham

Nicola Buckingham

Associate
Rural Research

Savills Margaret Street

 

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