The present study is the fourth edition of the timberland research paper which Dasos Capital (Dasos) has updated every second year or so. As previously, the need for the up-date is determined by the continuing evolution of the timberland investment environment. With the recent substantial growth in Europe, the US and other regions, the global institutional timberland investment business is now a EUR 100 billion industry.
Timberland as an Investment Business
The global timberland investment business has gradually, over the past 25 years, sprouted as a part of the overall private equity sector which has been growing at the speed of about 15-20% per annum worldwide since the early 1990s. The private equity growth is expected to continue faster than the global GDP growth rate, and due to the surge of investor interest in real assets, the timberland investment business might in some cases grow even faster.
The private equity industry, and the timberland investment business with it, has become an essential component in the engine of a modern market economy which is continuously renewing itself through the Schumpeterian process of innovation and creative destruction. The destruction/innovation -process drives the economic growth and overall well-being through increasing productivity by spin-offs and re-allocation of assets, such as timberland, to the hands of the active core competency owners with focus to enhance profitability and to expand via innovation. From this angle, the trend of establishing larger timberland entities with more substantial industrial rationale from the fragmented European smallholder property base will continue. The activity is generating sizeable timberland portfolios, also suitable for larger timberland funds in the secondary market. Based on a potential securitization in the retail investment market, it is furthermore possible that the larger timberland portfolios may eventually facilitate the re-formation of the household forest ownership, thus closing the investment circle. Rather than the ownership change per se, the ultimate outcome of the European timberland investment activity might thus actually emerge as re-establishment of the forestry business in the form required by a modern society.
