LandVest had another productive year in 2023, closing nearly $800 million in sales within our Institutional Land Group. We represented our clients across 19 states transacting almost 280,000 acres of land. The market was mixed in 2023 across sectors with strong demand for scaled institutional forestland portfolios, while the market for retail and mid-sized land properties softened. As expected, we saw improving inflation, elevated interest rates, and continued interest in climate solutions and natural capital investments in 2023. See Chart 1 for a summary of relevant economic data.
Institutional (greater than $10 million)
Markets for investment grade timberland and associated environmental assets remained strong in 2023 with continued interest and demand from investors. As in the past two years, inventory was constrained compared to demand with many prospective sellers opting to hold their assets. This, combined with an ever-increasing buyer pool of both traditional and natural capital investors (domestic and international), has resulted in increased pressure on available offerings. Among the several large-scale bid events LandVest administered this year, participation was again very strong, as demonstrated in Chart 2:
We expect 2024 to look a lot like the second half of 2023. The drive for inflation protection is now softening as inflation rates calm (Chart 1). We expect sellers will be motivated by a variety of market forces including interest rate improvement, continued interest in natural capital investing, portfolio re-balancing, and continued strong timberland sale values. Unknown risks and uncertainties include this year’s presidential election and unfolding geopolitical events. As we head into 2024, we see a strong sellers’ market for quality institutional offerings.
Mid-Market ($1 million – $10 million) and Retail (Less than $1million)
Limited inventory was also a prominent theme of mid-market and retail opportunities in 2023. As can be seen in Chart 3 below, transaction volume steadily slowed since 2021. Interest rate pressure more directly affected these markets, icing some sellers with demand and value concerns. New inventory has also been curtailed by the pre-selling we saw in 2020-2022 due to strong demand for land during that time.
Meanwhile, non-cash buyers are struggling to find value at current interest rates. Nevertheless, buyer demand for quality properties was solid in 2023; Chart 4 demonstrates continued interest in vacant land in many markets evidenced by decreasing days on market for completed transactions. Limited available inventory of high-quality properties located in relative proximity to primary population centers and services are likely to continue to transact at strong pricing reminiscent of prior peak market activity. By contrast, achievable sale pricing for a more deeply rural woodlot of average quality is expected to soften as values realign with buyers’ renewed discipline in a higher interest rate environment. In the big picture, the overall decline in available inventory (since 2021) has preserved excellent opportunity for all types of sellers in the current market.
It is worth noting too, that the pool of vacant land buyers has evolved in recent years with expanded and varied buyer motivations from traditional to modern recreational interests, to woodlot/timber investment, conservation and stewardship, as well as climate services and environmental mitigation. This good news, in addition to the recent Federal Reserve comments signaling likely interest rate cuts this year, both further indicate improving activity in these segments in 2024.
All in all, sellers are experiencing strong values in many markets and across various land types. Meanwhile, buyers are finding near-term benefits from new and traditional uses and long-term value from a finite and increasingly scarce resource.
LandVest is the national leader in timberland transactions and manages more than 2.2 million acres of private forestland across the country. Our presence in the marketplace allows us to provide deep exposure to key market segments as well as local intelligence to provide hands-on, ground-level marketing. We employ nearly 70 full-time foresters, GIS technicians, biometricians, surveyors, and other natural resource professionals. LandVest provides comprehensive land services including acquisition due diligence, operational logistics, forest management planning, timber sale administration, growth modeling, non-timber asset evaluation, and financial analysis to assist our clients in reaching their management and transactional goals.
If you are considering buying or selling an asset, portfolio, or parcel, we would be pleased to talk with you about it. Contact us to tell us more about your unique property and discuss how LandVest can help you achieve your land investment goals. Properties represented by professional, transparent, thoughtful, well-executed marketing with a strong international reach are best positioned to achieve superior results.