Domain Timber Advisors: Near-term factors likely to constrain timber and lumber prices over next three-to-six months; interest in timber asset is increasing, both from existing investors and new entrants interested in meeting carbon or biodiversity goals

ATLANTA , October 19, 2023 (press release) –

This is the third of a quarterly series of timber market analyses from Scott Reaves, director of natural sources at Domain Timber Advisors, Atlanta-based timberland investment management organization with nearly US$600 million in assets under management. 

How did the timber market perform in the third quarter of 2023?

• We saw timber price movement consistent with typical patterns observed in prior years from second to third quarter transitions. Timber Mart South reports South-wide pine stumpage prices saw a modest decrease along with hardwood and pulpwood pricing. Hardwood sawtimber’s average bucked the trend, increasing slightly. Price declines this time of year are generally cyclical in nature and brought about by drier weather across much of the U.S. South, which increases operability and more product being brought to market.

Based on this past quarter’s performance, what is your timber outlook for the rest of this year and the first quarter of 2024? What market factors are driving timber demand?

• We expect a variety of near-term factors to keep timber and lumber prices flat or slightly down over the next three-to-six months. Factors include declining housing starts in the face of high interest rates along with typical market cycles tied to seasonal weather patterns. Lumber pricing steadied considerably from the roller coaster ride of several months ago, and we expect prices to remain relatively stable or slightly elevated compared to historical averages, around $400-to-$500 per thousand board feet.

Amidst the backdrop of geo-economic and geopolitical uncertainty, have you noticed an increasing number of investors exploring timber as a long-term investment option?

• Yes. This includes interest from existing investors looking to increase their allocations and new entrants to the space interested in meeting carbon or biodiversity minded goals. Most groups continue to seek the historically low risk and stable return profile of the asset class while also paying more attention to elements like sustainability certifications in light of new ESG requirements. We believe Domain’s value-added timber strategy has been of particular interest to investors due to its differentiated approach to the asset class.

What other market trends should investors closely monitor (as it relates to timber)?

• Several trends, in addition to housing, are worth monitoring. Mass timber continues to be of interest to investors, especially with its potential for consistent performance under testing standards such as those for Machine Stress Rated lumber, which may help drive demand over the next several years (SLB September 2023 Newsletter - Softwood Lumber Board). Carbon storage and sequestration also remain key drivers. Sequestration in woody biomass and wood products is a primary focus, but alternative methods are also coming online, such as underground storage of carbon beneath working forests. Biodiversity is another topic we are hearing more about with conservation and protection of important habitats at the forefront of that conversation. We believe a sustainably managed timberland portfolio can meet multiple objectives of these types in addition to providing an economic return.

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