California wildfire season was tough in 2017, but NorCal economy survived

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January 11, 2017

By: Susan PersinResearch Director, Northern California, JLL

Last year was a tough fire year for Californians. Dry conditions and strong winds were a devastating combination. Damage estimates from fires throughout the state topped $10 billion before the impact of the Southern California wildfires had been measured. The acreage burned in 2017 was double that of the average for the last five years. In fact, an area equivalent to three times the area of Chicago was lost in the state this year.

$9.4 billion in losses

Northern California losses have been measured. The October wildfires claimed 245,000 acres, 44 lives, and led to an estimated $9.4 billion of insured losses. The worst of the devastation was centered around the city of Santa Rosa and in Napa County.

The North Bay fires were by far the most destructive in the region’s history, but the immediate impact to the area’s $50 billion wine industry wasn’t as bad as had been expected while the fires were still raging. In Napa and Sonoma, only 10 out of 1,200 wineries were destroyed or badly damaged, and 90 percent of the grape harvest had been brought in before the fires began.

Commercial real estate markets relatively unscathed

Physical property damage to the North Bay’s office, industrial and retail sectors was not substantial. Even with some increased demand in the weeks after the fires, office vacancy in Sonoma (8.3% office vacancy) and Napa (4.3% office vacancy) was little changed. New warehouse space requirements will come later as rebuilding gets underway.

Residential hit hardest

The fires’ biggest impact was to the residential sector. Many homes and, in some cases, whole neighborhoods were destroyed. The city of Santa Rosa and Napa County lost 5% and 3%, respectively, of their entire housing stock in what was already a tight – and expensive – residential market.

Residents displaced by the fires have limited options. Apartment vacancy in Santa Rosa, for example, is less than 4%. Median prices of single-family homes grew 5 to 8% in Napa and Sonoma counties in October from the prior year.

Despite the difficult situation with expensive building costs and a scarcity of labor, recovery has begun, with many businesses and residents committed to rebuilding.

Read JLL’s full white paper on the California Wine Country Wildfires here.

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“Is it a good time to buy a house?”. That’s the question I’m most often asked when I tell people what I do. My answer is informed by more than 20 years of experience analyzing supply and demand conditions in real estate markets and preparing market forecasts for all types of properties, ranging from residential to office, industrial, and retail. The numbers are critical, but telling the story behind the numbers, whether to IPO investors, a bank’s investment committee, or through social media, is what I find most interesting and is an area in which I have been told that I excel.

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