Forestland markets have changed substantially in the past 18-24 months, perhaps more rapidly than at any other time in recent history. Throughout the pandemic (March 2020 onwards), we saw a substantial increase in transaction activity. On the buy side, aggressive interest in timberland properties emerged across a broad range of buyer types—everything from the smallest retail buyers looking for a return to rural living, to the largest professional groups seeking safety and inflation hedging, as well as speculating on carbon and other environmental services.
On the sell side, we saw sellers taking advantage of the increased market activity and exiting their ownerships during a time of record-high demand. A volatile market delivered strong deal flow and, in many cases, record-high pricing. In 2022, LandVest’s Timberland Marketing Group achieved a record year with over $1.4 billion in timberland sales across the country.
As summer 2023 approaches, we continue to see strong demand for forestland investments across all US regions, continuing the trend of the past two years. If the defining characteristic of 2021-2022 markets was volatility, the defining characteristic of 2023 is scarcity. There is tremendous scarcity of seller inventory at a time of competitive demand from a growing number of buyers who have yet to successfully purchase a suitable forestland investment. Many of the sellers that remain after the peak of pandemic-era sales activity are those with long-term investment horizons.
Many timberland investment groups are in a holding pattern, speculating that the rising value of carbon credits and other environmental services will carry additional value growth over the next decade. Prospective sellers are also asking themselves, “If I sell, to what alternative investment am I moving to next?” As such, 2023 has so far been a year of limited inventory. We anticipate this trend continuing for the foreseeable future.
Demand for investment-grade forestland stems from a combination of limited available inventory, corporate net zero carbon commitments, speculation as to the future value of carbon and other environmental services, new foreign and domestic investors entering the timberland space with lower return expectations, and mills revisiting vertical integration in a protective bid to ensure long-term fiber supply.
Further, this is a time of significant geopolitical turmoil, rising interest rates, and growing economic concern, all of which further support buyer’s enthusiasm for real, tangible assets as a preferred means of security and wealth preservation during uncertain times.
The current market is well capitalized at a time of low seller inventory, creating a strong seller market with tremendous opportunity to capture premium sale values through the use of a strategic marketing presentation of the highest professional caliber. If you are positioned to be a seller at this moment in time, or if you are a buyer struggling to acquire a desirable timberland asset, we welcome the opportunity to speak with you, learn about your investment goals, and discuss how LandVest may be of service. Our consistent advice to sellers in this market remains “this may be the best time to sell land in a generation.”