< Previous150 MARCH 2025 SITE SELECTION R ebuilding Southern California in the wake of the recent wildfire devastation across multiple Los Angeles–area communities will be complicated by an insurance crisis that is not easily fixed. The Wharton School of the University of Pennsylvania estimates the insured losses from the California wildfires at up to $30 billion. For many business and residence owners, recovery will not come without significant costs. If you are one of the lucky ones who did not have your fire coverage canceled by your insurer, you will likely face rising insurance premiums once you do elect to rebuild. Commercial real estate data company Trepp reports that the average property insurance expense increase from 2019 to 2023 in California was 81.64% — compared to the national average rate hike of 77.19%. For industrial property owners, the bill is much steeper. Trepp reports that industrial property insurance rates in California climbed 120% from 2019 to 2023. The average U.S. industrial rate hike over that same period was just 50%. If you own office space, it will cost you 89.83% more to insure your space today than it did just five years ago. On a recent webinar, three Trepp analysts noted that “the inability to effectively underwrite this in the future makes it impossible to effectively valuate these properties and buy them.” The good news, they said, is that none of the impacted commercial mortgage- backed security loans in the Southern California areas affected by the fires were in delinquency prior to the losses. In a late January report on LA area fire losses, the Wharton School noted that insurers in California are now seeking premium increases of 30% to 50%. With many insurance companies now viewing California as an extremely risky market, a number of them are declining to underwrite any new policies. The situation is complicated by the fact that many of these same insurers are still paying out claims to businesses and homeowners affected by hurricanes Helene and Milton from last summer and fall. Those twin storms caused $114 billion in damages and losses in Florida, Georgia and the Carolinas. To date, total economic damage from the 24 California wildfires is estimated somewhere between $250 billion and $275 billion. The fires consumed 45,000 acres, killed 37 people and destroyed more than 15,000 structures. WILDFIRE RECOVERY HOW AN INSURANCE CRISIS COMPLICATES REBUILDING Recent LA area wildfires Getty Images152 MARCH 2025 SITE SELECTION Policy Changes Recommended Experts say that recovery will require a massive shift in policymaking in California and some creative thinking. For one, regulators will have to take a look at systemic changes to regulatory approval processes, including those for insurers. Florida, for example, recently gave the green light to 10 new property insurers to do business in the state, alleviating an untenable burden on Citizens, the state’s official carrier. Making it easier and cheaper to build commercial and industrial structures will be a necessary step as well, say economic development leaders in California. The California Association for Local Economic Development recently opposed AB 98, a warehouse development restriction bill. Gov. Gavin Newsom signed it into law anyway. CALED separately supported passage of SB 1140, which streamlines formation of Enhanced Increment Financing Districts to make the process easier and cheaper. This time, Newsom sided with CALED and signed the bill. To help manufacturers, CALED backed AB 52, a bill to allow a credit against state personal or corporate income taxes to offset sales and use taxes dedicated to local agencies on manufacturing and research equipment. The bill passed, but Newsom vetoed it. CALED President and CEO Gurbax Sahota says that, despite these defeats, CALED will continue to advocate for streamlined regulations and help for local communities. When Newsom recently unveiled his California Jobs First Economic Blueprint, which sets aside $120 million to support “ready-to-go” job-creating projects over three years, Sahota said the plan did not do enough to integrate local input and support. “About $120 million is left in the pot for Jobs First money for development projects, but the problem is that most of the local economic development groups did not engage with the regional plans,” Sahota says. “Cities and counties did not participate in these plans. It will be disconnected from the local level. As a result, I have communities coming to me and asking, ‘How do we access this money?’ ” Role of Incentives in Recovery Sahota credits the governor, however, for keeping effective incentive programs, like California Competes Tax Credits and film industry credits, in place. Ellen Harpel, founder of Smart Incentives, says that California has a good track record of establishing and maintaining incentive programs that produce a measurable and effective return on investment. “California’s Employment Training Panel [ETP] is a state agency that reimburses the costs for employer-customized job skills training,” she says. “They do great work. A 2020 study from Brookings found the ETP had positive and significant impacts on incentivized companies.” A similar study conducted on California Competes and published in the Journal of Public Economics in January 2023 found that each CTCC-incentivized job in a census tract increases the number of employed people working in that tract by nearly three. “These are good models for other states,” says Harpel. “They have built-in accountability measures. A lot of progress has been made. There is so much more transparency now. It is miles ahead of where it used to be.” —Ron Starner Industrial property insurance rates in California increased 120% from 2019 to 2023. Source: Trepp156 MARCH 2025 SITE SELECTION T he new $85 million Chula Vista Entertainment Complex (CVEC) is positioned to cater to modern studio needs in California. In December 2024, the Chula Vista City Council unanimously approved a letter of intent from CVEC to move forward with the construction of a planned 89,600-sq.-ft. fi lm and television production facility in San Diego. CVEC’s investment comes at the heels of Governor Gavin Newsom’s proposal in October 2024 to increase the state’s fi lm and television tax credit from $330 million to $750 million per year. If passed, it would further cement the California as one of the top states in the nation for tax rebates for the industry. “The Hollywood model is broken — and CVEC is here to change that,” said CVEC Founder and CEO Aaron David Roberts. “Chula Vista is a city that dreams big, and as big dreamers ourselves, we’re proud to join forces on this industry-shifting complex. Together, we’re not just revitalizing the local production economy; we’re putting San Diego County back on the map as a powerhouse for media and innovation.” Pitch documents submitted by Roberts and his team detail the industry’s lack of regional hubs, while noting the region’s untapped potential to become a key player in Southern California’s media landscape. The location was selected due to its unique ability to cater to markets in both San Diego and Los Angeles. Millenia Library will host 75,000 sq. ft. devoted to post-production needs. Phase two will take place across the street from the library to construct a virtual entertainment complex. The last phase will bring the potential of commercial, retail and hotel space on the remainder of the site within the next eight years. Over the next decade, the estimated economic impact of this development is in the ballpark of $545 million. CVEC is anticipated to begin operations in three years, creating up to 200 new direct jobs at the complex. “The Chula Vista Entertainment Complex will be the only campus of its kind in San Diego County,” said Chula Vista Mayor John McCann. “This project will set a new standard for our region and will bring critical new economic development to South County.” — Alexis Elmore San Diego’s new production studio aims to draw in new industry productions outside of Los Angeles while fostering a strong talent base in Chula Vista. Getty Images Holl wood HEADS TO SAN DIEGO SITE SELECTION MARCH 2025 157 existing East Coast manufacturing site in Portsmouth, New Hampshire, as well as its international network across Europe and Asia Pacific.” The firm notes that “with a total bioreactor capacity of around 330,000 liters, the Vacaville site is one of the largest biologics manufacturing facilities in the world. This acquisition significantly extends manufacturing capacity for late-stage clinical and commercial products, and new molecules on the path to commercialization within the Lonza network.” Lonza CEO Wolfgang Wienand said, “The successful acquisition of the Vacaville site marks a major milestone for Lonza and for our commitment to deliver long-term value for our customers and shareholders. As the Vacaville site joins our Biologics division, we look forward to bringing new customer projects into the facility to meet sustained demand for commercial biologics manufacturing across our business. I am also delighted to welcome more than 750 highly skilled Vacaville colleagues into our global team, as they begin a new chapter with Lonza.” Bargain Hunting in the Bay Area For Vacaville, the Lonza commitment is an economic shot in the arm. “It is an exciting time for biotechnology and (continued from p. 147) (continued on p. 160)Next >