As the US farmland market is slowing down, returns from buying forestry land is picking up, lifted by demand from China and recovery in the US housing market.
US timberland values returned by 9.8% in the year to the end of March – the strongest annual performance since the third quarter of 2008, as the world was entering economic crisis, the National Council of Real Estate Investment Fiduciaries said.
These returns are still lower than those obtained from cropland, estimated by the council last week at 17.4% over the past year.
However, on terms of price appreciation alone, the forestry market has nearly caught up.
The timberlands return figure comprised price growth of 7.0%, with the balance from income.
Growth in cropland values has slowed to 8.4%.
The rising returns reflect in part revival in US housebuilding, a key source of demand for timber.
"US housing recovery continued at a modest pace, supporting increased timber harvest volumes across the US," said Mary Ellen Aronow, chair of the Ncreif timberland committee, and a senior forest economist at Hancock Timber Resources Group.
However, she also highlighted "strong" export orders for wood, "in particular demand from China".
This demand was "reflected in record-setting prices for timber in the Pacific North West," a key US timber-growing region, largely in Washington state.
Indeed, returns in the Pacific North West were particularly strong over the year to the end of last month, hitting 18.1%, up from 14.1% in the previous year.
Ms Aronow forecast continued strength in the sector, terming "positive" the outlook for both timber and forestry markets.