A buoyant forestry market in Scotland and north-east England is creating strong demand for marginal farmland for woodland creation.
Premiums above a parcel’s agricultural value are being paid if forestry investors are involved, with upland sheep units often viewed as strong propositions.
Jamie Adamson, Savills’ head of forestry investment, said the purchase of agricultural land in Scotland for new woodland creation was “one of the most buoyant marker sectors in 2016”.
“This was driven in part by a shortage of quality, stocked woodland property on the market,” he added.
What are forestry buyers looking for?
What makes a good proposition for forestry investors hinges on project viability, said Mr Adamson.
Mountainous terrain and prime arable or grassland are not a target for new plantations, but upland farms can be suitable.
“A lot of farmland sold [for tree planting] is in the sheep sector with people either retiring or leaving farming,” Mr Adamson said.
Location can be important but if the land is physically plantable then it can generate significant interest.
“Land within conservation designations are often not viable, and planting on deep peat soils is prohibited – those issues are considered show stoppers.
“Other barriers can be site specific such as access, geology, soil type, surrounding forestry and proximity to mills, which can affect how attractive the land is.”
Chris Edmunds, director at Davidson & Robertson Rural, said that while Scotland was the main market, land is being sold to forestry investors in Northumberland, too.
He said middle hill land, which is not too rocky or steep, is attractive and some marginal grazing is also plantable.
“If land can be planted then it is underpinning land values and usually [achieving] over and above agricultural value,” he said.
“Recent sales we have handled included 780 acres in north-east England and 1,600 acres in Dumfries and Galloway for forestry purposes. We have advised on various woodland creation schemes.”
What’s happening in the market?
Statistics on exactly how many acres of farmland were sold last year for the sole purpose of tree planting are not available, but Savills says investors are extremely active.
A recent sale of a 1,000-acre site in Scotland saw the top three offers tabled by bidders from the forestry sector and the bottom three bids from farmers. The firm said the range between the offers was significant.
The forestry market as a whole continues to perform well for investors, particularly in Scotland.
“The political will is there to plant more trees, backed up by grants, and the investment case for forestry is a very strong,” Mr Adamson said. “People want alternative land-based assets that they can put money in to.”
Northern Scotland saw the most activity last year, with nearly 18,500 acres sold and an average value of £6,422/acre. Just over 40,700 acres in total were sold across the county.
About 4,500 acres were sold across the whole of England and Wales in 2016.
£11m forestry portfolio launches
A huge portfolio of ten forests throughout Scotland has just been launched by John Clegg & Co for offers over £11.25m.
The Stellar Forestry Portfolio includes nearly 4,000 acres from Inverness-shire in the north to Dumfries and Galloway in the south.
The company said it was unusual for such a large swathe to become available in one sale.
The prime commercial forestry is based in southern Scotland with the sporting and diversification element of the portfolio in the north.