Timberland REITs specialize in owning timberlands and harvesting and selling timber for lumber products through their taxable subsidiaries. Timberland REITs support climate solutions for decarbonizing the real estate sector by supplying wood-based construction materials, which absorb and store carbon during growth, offering a lower-carbon alternative to more emissions-intensive materials like concrete and steel. They also provide carbon capture and sequestration opportunities for companies and other organizations looking to meet net-zero commitments.
Timberland REITs were introduced as their own property sector in the FTSE Nareit All Equity REITs Index in January 2011. Currently, the property sector has three REITs with an equity market capitalization of nearly $25 billion. Timberland REITs own nearly 15 million acres of land in 18 different states in the U.S., primarily in the Southeast and the Pacific Northwest.
The lumber business is strongly tied to construction. Construction in general, and residential construction in particular, has slowed considerably due to tariffs on building materials and labor shortages and stoppages from immigration crackdowns. Construction spending peaked in May 2024 according to the Census Bureau and continued to decline in 2025.
Housing affordability remains a key issue. The number of new homes for sale has been rising steadily since 2022, with an inventory of 123,000 unsold homes in August. With new homes sitting unsold, residential construction is flat in 2025 after declining in the second half of 2024. New housing starts were also down 8.5% in August on a seasonally adjusted basis, after two months of increases.
Timberland returns rebounded slightly in the third quarter of 2025, up 0.7% though still down 6.68% year to date. Despite the economic uncertainty, active managers have been increasing their allocations to timberland. As of mid year,, timberland increased its allocation in actively managed real estate funds’ assets under management by more than 1 percentage point from the previous year, and the sector was overweight in the funds. Active managers were overweight timberland by 0.4 percentage points compared to the FTSE Nareit All Equity REITs Index, or at 119% of its index weight.