Biomass demand boosts U.K. woodland values

By Ryan C. Christiansen
Web exclusive posted Dec. 5, 2008 at 9:51 a.m. CST

The value of forestry land in the United Kingdom has more than doubled in the past five years and land values remain strong, due in part to a growing biomass market, which is beginning to have a positive impact on woodland values. Those findings are included in "The 2008/09 Forest Market Report" published by UPM Tilhill, a U.K. forestry, woodland management, timber harvesting and landscape construction company, and Savills, a U.K. real estate service provider. The report covers properties larger than 25 hectares (approximately 62 acres).

"Wood-fired plants at Shotton, Teesside and Lockerbie, alongside new projects underway such as Tullis Russell in Fife and Drax in North Yorkshire, are beginning to generate a real and sustainable source of income for woodland owners," the report stated. "Oil prices are likely to remain high, adding further economic justification to using wood as a source of energy, in addition to any carbon benefits."

According to the report, investors who have owned woodlands during the past five years have enjoyed capital growth of more than 100 percent, with the average price reaching GBP £3,596 per hectare (US$2,150 per acre). This is despite a downturn in construction and associated falls in timber prices as many sawmills reduced capacity or shut down. Meanwhile, demand for pulpwood exports to Scandinavia and Finland remain strong.

"Forest investment won't escape the downturn in construction and associated falls in timber price," the report said. "If this is anything other than a fairly short-term blip, the value of mature woods with immediate fellings will fall, but the picture for younger woods remains optimistic."

"In a year which has seen oil prices reach record levels, the economy slip towards recession and the nationalization of three major banks, forest owners are really bucking the trend," said Simon Hart, woodland investment adviser for UPM Tilhill. "The report shows how forests and woodlands can be seen as a safe haven in these uncertain economic times." There are signs that woodland owners, who have seen strong rises in value and optimistic forecasts, are taking a long-term view with no rush to sell, as transactions were down on 2007 levels, the report said.