As the victims of the Los Angeles wildfires start looking toward an uncertain future, the distance to Fresno over the Grapevine could close in many ways as an unprecedented rebuilding process begins. Photo via Los Angeles Fire Department

With at least 28 lives lost, more than 12,000 structures destroyed, 80,000-plus people who were or still are under evacuation orders and damage estimates in the tens of billions of dollars, the Los Angeles wildfires will go down as one of the most devastating natural disasters in California history.

Hundreds of fire crews from the Central Valley are already on the frontlines in Southern California, and local companies are also on the ground working to deal with the aftermath.

With so many displaced and full recovery to be measured in years, The Business Journal asked local experts how the aftermath of the fires may reach across the Grapevine and touch the Central Valley.

The forecast: Higher demand for housing and contractors along with increased insurance and construction costs.

And there will be opportunities as Angelenos look aspirationally toward what Gov. Gavin Newsom called “L.A. 2.0.”

 

Won’t move the rent needle

On Wednesday, 15 leading multifamily firms and commercial real estate groups pledged to support the immediate and long-term needs of displaced tenants in the Los Angeles area. In addition to fighting possible price gouging by landlords, other recommended actions included offering flexible leasing terms, waived fees and rent freezes.

With Fresno’s rental market marked by years of rent increases – up almost 10% in the last year, according to one study – could an influx of displaced tenants and homeowners help drive demand (and rent) up even more?

Not likely, said Robin Kane, managing director and multifamily specialist with Northmarq in Fresno.

“I think the distance is too far,” Kane said. “People have jobs, kids in school. They want to stay as close as they can.”

Likelier landing spots for the displaced would be further inland, including the high desert.

If they have a connection with people in the Central Valley, they may come here, but not enough to lower rents.

“The Grapevine is such a big, geographical roadblock,” he said.

 

Disaster work

Kane noted that it could be a year before any sort of rebuilding can occur. The federal government has already approved $100 million in spending to remove hazards such as asbestos, batteries and household waste from the rubble before it can be cleared away.

 

It could take months for private cleanup crews to remove all the toxic materials. And there’s also the question of where to put it.

The Lahaina fires in Maui in summer 2023 also destroyed thousands of buildings. A landfill on the island holds enough refuse — including soil contaminated with arsenic and lead — to cover five football fields five stories high, reported the Associated Press.

“I hope it doesn’t come to Kettleman Hills,” Kane said, referring to the hazardous waste facility near Kettleman City run by a subsidiary of Waste Management.

Local crews are already on the ground, helping in the relief and recovery effort. Visalia-based ServiceMaster by Benevento is one of the largest cleanup and restoration companies in the Central Valley. Chief Operating Officer Daniel Carpenter said that of their 100 team members, 20 have deployed to Southern California in the last couple of weeks.

They now include inspectors working on new projects and team members servicing existing accounts, which included bio cleanups for a shelter for the wildfire displaced in Pasadena.

With more than 80,000 people still under evacuation orders, residents are understandably anxious to get back onto their properties. But a methodical search for human remains must happen first.

Then comes the cleanup, with months of work ahead for crews with and without the required hazardous material certifications.

“The whole office is just abuzz,” Carpenter said.

 

Premium pain?

As a company that deals first-hand with insurance carriers, Carpenter reiterated what many already predicted — this disaster is going to further stretch California’s beleaguered insurance markets.

A report released Thursday by the Treasury Department studied nearly 250 million homeowners insurance policies over a four-year period, examining the costs of “climate-related events.”

It found average homeowners insurance premiums increased 8.7% faster than the rate of inflation in 2018-2022, according to the data analyzed. Consumers living in the highest risk ZIP codes paid $2,321 in premiums on average — 82% more than those in the lowest risk areas.

Carpenter is hearing that it will be substantially more difficult to find a carrier for property insurance after this disaster — and it could double in price.

Kane noted that all eyes are on the California FAIR Plan — known as the insurer of last resort in the state’s riskiest areas. If it goes insolvent, commercial insurance carriers could be called upon to make up the difference.

Customers could be on the hook for that, as California’s insurance commissioner last year enacted rules that capped insurance company exposure, allowing them to pass costs on.

Commissioner Ricardo Lara took the step to stem the tide of major insurers leaving the state.

On the insurance front, the outcome from the wildfire is likely to touch all consumers.

“In the long term, this is probably not going to be good for anyone in California,” Carpenter said.

 

Time to rebuild

Both Kane and Carpenter referred to an impending “sucking sound” that will represent general contractors, subcontractors, laborers and construction materials shifting to Southern California as the actual rebuilding process begins.

Carpenter has experience with the demand for labor in disaster situations. He said Servicemaster by Benevento had to protect its job sites at the 2018 Camp Fire and 2019 Kincaid Fire to prevent labor contractors from poaching their workers with offers of almost double the wages.

“If you are a worker, I don’t blame them,” Carpenter said about those who took the offer.

For general contractors, Kane predicts a “home improvement Lalapalooza” in about a year. That means it will be harder to find crews for work here in the Valley, and the cost of construction materials will likely go up as well.

“We are going to feel that in the years to come,” Kane said. “You are talking about a massive undertaking.”

Call the Valley home

Don Scordino, a Realtor with Realty Concepts in Fresno, believes some of the displaced may enter the market to purchase homes in the Central Valley.

“The biggest factor is supply and demand,” he said. “They won’t all be able to find a place five miles away.”

“And we do have a better inventory here than Los Angeles,” Scordino added.

With the cost of construction materials expected to rise, he noted the price of new homes could also rise.

He said he and the agents he has spoken with haven’t started receiving calls of interest yet, but he noted the fires just happened and the displaced may just be settling in temporary lodging.

One thing Scordino is certain of — the Central Valley’s relative isolation from the other major urban areas of California could start to give. The region saw some of that during Covid, though Scordino noted that 82% of buyers in that period were locally based.

He believes the fires will further connect the Central Valley with Southern California.

“We’ve been our own island,” Scordino said. “That could start getting blended.”