The mar­ket

Shooting Gazette - - The Review - James Adam­son Di­rec­tor – Forestry In­vest­ment Sav­ills

It is now be­com­ing clear how the mar­ket for UK for­est prop­erty is tak­ing shape this year. Although a good num­ber of plan­ta­tions have been ad­ver­tised for sale, supply is down on 2016 and at the end of June this year supply of in­vest­ment forests (ex­clud­ing mixed use or amenity wood­land) was back by about 40 per cent.

The drop was less pro­nounced in cu­mu­la­tive ask­ing price, which showed a 20 per cent cor­rec­tion; this high­lights the re­gional dif­fer­ences be­tween for­est val­ues – it is ac­tu­ally very dif­fi­cult com­par­ing like-for-like in forestry as each prop­erty has unique char­ac­ter­is­tics af­fect­ing value.

Of course, forestry - like any prop­erty as­set class - has dif­fer­ent grades or qual­i­ties that in­flu­ence mar­ket­ing and price. To be classed as ‘prime’ in­vest­ment as­sets, forests should typ­i­cally have scale (per­haps over 500 acres), be grow­ing a good pro­por­tion of the higher yield­ing conifer species such as spruces, have (or at least have the abil­ity to de­velop) good ac­cess, and be well lo­cated for a range of com­pet­ing tim­ber mar­kets. Match­ing all these cri­te­ria tends to be limited to the south­ern half of Scot­land and in a few iso­lated parts of north­ern Eng­land and cen­tral Wales. But there are plenty of poorer-qual­ity as­sets in these ar­eas too, and in­deed other more re­mote parts where an ‘in­vest­ment mi­cro­cli­mate’ oc­curs pro­duc­ing the odd hid­den gem.

The in­vest­ment mar­ket has a num­ber of very ac­tive buy­ers in the prime sec­tor, but our re­search shows ac­tiv­ity drops off quickly with some sec­ondary or un­ex­cep­tional for­est prop­erty hav­ing longer mar­ket­ing times or put un­der of­fer without go­ing to a clos­ing date. Large spruce-dom­i­nated forests in prime ar­eas sell quickly and nor­mally at­tract com­pet­ing buy­ers, but, like any form of in-de­mand com­mer­cial prop­erty, yields are low in com­pet­i­tive bid­ding sit­u­a­tions (sub three per cent) and buy­ers will have to expect lower re­turns for the best as­sets. There is now some sen­ti­ment that cap­i­tal val­ues, which have seen sus­tained an­nu­alised growth of around seven per cent for the past 20 years, are near­ing their zenith, but that ig­nores the ef­fect tim­ber prices have on forestry val­u­a­tion; if tim­ber prices con­tinue to rise – which they are fore­cast to – they can con­tinue to drag for­est val­ues up fur­ther.

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