On the 25th November, John Clegg Co, TilHill Forestry and Strutt & Parker, published the UK Forestry Market Report; detailing a rapid upsurge in investor demand for UK forestry. What has caused this rapid upsurge in demand and what will be the result of the rapid inflation of timberland price that may follow?
Many of the conclusions that can be gleaned for the report are very encouraging, if not surprising. Gavin Adkins (Managing Director, Tilhill) begins by demonstrating the massive increase in demand for forest assets: “over £200m of forest properties traded year during the year…15% of the transactions above £5m”.
The report outlines the attraction provided to potential investors by the cyclical nature of the forest market which in the past has promised: “long-term returns”. As a consequence, 2020 has seen “record results in both scale and unit prices” of forestry assets.
Much of this investment is directed into young forestry projects with a high potential for future growth, providing opportunities for various prospective corporations to investigate: “how carbon offsetting through woodland creation”, can be utilised in meeting governmental environmental standards. This confidence is further bolstered by increased confidence over the performance of plantation management and its propensity for profit.
The evidence in favour of pursuing carbon offsetting targets via forestry investment is clear. As stated in the report “UK woodland validated (i.e. certified) under the Woodland Carbon Code rose 60% year-on-year in 2019 to 9,372 hectares” displaying a clear momentum behind the effective use of sustainable forestry practices in the UK.
The report makes evident that the concentration of investment in the UK commercial forestry sector is centred around Scottish spruce plantations providing a startling 69% of recorded sales. The attraction to this particular conifer, is undoubtedly down to its fast growth rate and ease of development into timber products and construction, coupled with an: “improved variety or types of spruce that have been planted in recent years… preforming as forecast with improved yield and form.”
These figures are not only encouraging for investors. Environmentalists will also be rejoicing at many of the recent developments. Improving the diversity of the Scottish forest resource will dramatically increase the local biodiversity and forest health of the area.
In conclusion, the establishment of a more robust woodland ecosystem can maximise the carbon store potential for UK plantation projects. Simultaneously, this increase in forest area is poised to contribute toward the creation of more efficient and sustainable domestic supply chain providing a sustainable turnover of crop to timber construction projects.
WHY HAVE FOREST VALUES INCREASED SO STRONGLY in 2020?
In answer to this question, the report highlights the profound market effect of moves by the UK government to decarbonise the economy and corporate entities increasing use of ESG reporting.
It is evident that many large corporations are investigating the opportunities to offset carbon and establish long term green infrastructure. The appeal is clear, with the ability to brand a firm as sustainable and benefit from government green grants and favourable marketing.
For the UK government themselves, investment in the forestry sector is a win-win scenario. The ability to meet ambitious carbon neutrality commitments laid out in various international environmental accords, whilst also supporting a domestic industry benefiting the economy and defending a carefully cultivated international image for green growth, will be a definite boon for Westminster.
Overall, the effect of this investment into young Scottish forestry projects is likely to be economically beneficial both for large institutions and private entities, in addition to forging the infrastructure usable in the future of sustainable building projects made from UK produced timber.
If the damaging effects of COVID-19 on timber supply chains can be mitigated, then the future of UK forestry appears bright, with a booming market for timber construction and an ever-increasing value of forest resources.
To read the original report follow this link
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