Investing in forestry has long been regarded as a sustainable and lucrative venture. As we step into 2024, it's essential to reflect on the recent trends in the forestry market and understand how these dynamics can influence investment decisions.

According to the latest report from Savills, the forestry investment market soared to new heights in 2022. However, the pace of growth in average values has witnessed a notable deceleration compared to the remarkable levels seen from 2019 to 2021.

In the forest year spanning September 2021 to October 2022, the average value experienced a commendable 7.5% increase, reaching just over £11,331 per net productive acre. While this marks a substantial rise, it's a departure from the extraordinary 50% surge witnessed in the 2021 forest year.

The total value of UK investment-grade forestry sold hit a record-breaking £295 million, with seven large sales accounting for 52% of this figure. Despite initial concerns about market performance in the face of economic challenges and potential interest rate hikes, the upper end of the investment market (blocks of more than 370 acres) demonstrated resilience, maintaining strong prices, albeit with some moderation.

Factors Shaping the Future of Forestry Investment

Savills identifies three pivotal factors that will shape the future performance of UK forestry and woodlands: carbon, biodiversity, and timber markets. These factors, however, are subject to the influence of unforeseen political and economic events.

The increasing demand for sustainable construction materials positions the timber market as a significant influencer on the performance of the investment-grade forestry sector. Smaller and broad-leaf woodlands, on the other hand, may see their demand and values more strongly influenced by carbon and biodiversity potential.

Balancing Carbon, Timber, and Biodiversity Income

The report notes that the concept of additionality is shaping the landscape of carbon and forestry schemes. The need to prove additionality means that deriving carbon income from financially viable timber production becomes challenging. However, in the creation of smaller amenity woodlands, there's potential to combine timber, carbon, and biodiversity income, alongside creation and maintenance grants. This presents a compelling opportunity for a steady cash flow over the lifetime of a woodland, provided certain criteria are met.

Market Trends in Smaller Woodland Parcels

The demand for woodland areas smaller than 25 acres remains robust, albeit with some pressure noted in the second half of the previous year. The average asking price for these parcels has risen by over 50% since 2018. However, the desire to purchase woodlands for lifestyle objectives is influenced by current cost-of-living rises and available wealth.

As we navigate the complexities of the forestry investment market in 2024, Klimate Smart stands ready to guide you towards sustainable and profitable opportunities. If you're keen to explore the world of forestry and carbon offset projects with a lasting impact, contact us today.

Let's embark on a journey that aligns your investments with a greener and more sustainable future.