FWN38 Autumn 2022 – Scottish Land Commission Report: A Buoyant Market for Forestry

The ‘Rural Land Market Insights Report’ was released in April by the Scottish Land Commission (SLC), the aim of the report was to identify trends in the market and help gain a better understanding of how the increased demand for natural capital investment is impacting and driving activity. The following summary of findings comes directly from the SLC report:

• High levels of recent demand for forestry and plantable land in Scotland have been driven by limited supply of forest assets, high timber prices and ambitious government targets for afforestation. Since 2019/2020 demand has increased substantially from institutional investors and financial institutions, with several new rural- investment funds entering the market, driven by increasing demand for environmental investments, and the strong long term returns from forestry.

• In 2021, the UK commercial forestry land market consisted of 67 transactions totalling 10,400 hectares (averaging 155 hectares), an increase from 61 in 2020, despite a reduction of 17% in the total area sold. Reflecting long term trends, Scotland provided 76% of the UK commercial forestry land market in 2021.

• The UK forestry market has experienced exceptional recent growth, with total recorded investment in commercial forestry land in 2020 and 2021 of over £200M, compared to £104M and £127M in 2018 and 2019 respectively. Average sale prices exceeded valuations by around 50% in 2021, a year that saw the largest ever annual investment in commercial forestry land (Scotland accounted for 76% of this activity).

• Per hectare values for UK forests increased by over 20% in 2021 to £19,300, with some younger second rotation forests selling for over £30,000 per stocked hectare due to high tree quality, investment potential and a forest road network. Larger forests (>100 hectares) attract particularly high prices.

• In 2021 there were 70 sales of land in the UK for planting (compared to 33 in 2020), sold for a combined total of £53M and totalling 6,480 hectares, an increase on the 4,460 hectares sold in 2020, with a further £23M invested in land for natural capital.

• Plantable land increased in value from an average of £6,200 per gross hectare in 2020 to £8,500 in 2021, with Scotland experiencing the sharpest rise in value of 54% on 2020 values (Scotland accounted for 62% of plantable land sales in 2021).
• Woodland carbon markets were a further important driver of investment in forestry through the ability to verify carbon units under the Woodland Carbon Code, especially from broadleaf/native woodland schemes on poorer quality land, where productive forestry is less viable.
• This sustained demand has resulted in an increase in off-market transactions for forestry and plantable land, with off-market sales accounting for as much as a third of sales in 2020 compared to 11% in 2019.

• While land availability represents a constraint to afforestation, the emergence of carbon markets in addition to a buoyant timber market and strong policy drivers, suggests growth in forestry and plantable land prices is set to continue.

The full report can be viewed at www.landcommission.gov.scot