Scarcity Sends California Vineyard Prices Soaring

Dec 18, 2014

(Wine-Searcher) - A local real estate expert says the price per acre in Napa could reach Burgundy levels within a generation.

Napa Valley will see vineyards sell for $1 million per acre in the next 30 years, a local expert predicts.

To put that in perspective, that's what Burgundy grand cru vineyards sell for now. Vineyard real estate agent John Bergman says the Napa market shares something with Burgundy: scarcity.

"They're not making any more land," says Bergman, who has worked on vineyard sales in northern California since 1987. "The restrictions to plant more vineyards are becoming more strict."

Currently, vineyards in the best areas of Napa County sell for about $300,000 per acre, with prime locations in Oakville and Rutherford fetching up to $350,000. Bergman says average Napa vineyard prices are almost nine times what they were when he started 26 years ago.

Prices are also rising in Sonoma County, though not as rapidly: almost four times what they were in 1987. Most vineyards sell for just short of $100,000 per acre, although prime coastal Pinot Noir vineyards are going for $125,000. Compared to Napa, this is a bargain. But Bergman says the buyers are completely different.

Napa vineyards are being bought by "lifestyle buyers," who want to live in wine country and eat at the fine restaurants, and by Asian investors, some of whom are mainland Chinese who want to shelter their money against potential future moves by the Chinese government.

Sonoma County has some lifestyle buyers, but it also still gets industry buyers: wineries that believe they can make money from the land.

"The winery buying more grapes for themselves, that's a non-emotional purchase," Bergman said. "The lifestyle buyer comes in for the grandeur of living in wine country. Maybe they want to make 60 cases of wine with their name on it to give to friends."

That said, even if some Napa vineyards don't appear to provide enough yearly return to justify their prices, the constant rise in the market for them still makes them a good investment, Bergman says. Vineyard prices rose constantly until the 2008 real-estate crash. It took five years for them to return to pre-2008 levels, but they are on the way up again.

"The investment buyers, most of them realize they have to hold onto the vineyard for 10 or more years," Bergman says. High prices in California are the reason Oregon has had a land rush of vineyards in the past couple of years. Bergman said Oregon vineyards of comparable quality to the best in Sonoma County cost about one-third as much.

"We're putting a winery for sale up in Oregon and we assume it'll go to one of the big Pinot houses," Bergman said.

Bergman expects Pinot Noir vineyards to continue to appreciate in value because many younger drinkers prefer that to Cabernet Sauvignon. This, he says, is why the vineyard land rush hasn't yet hit Washington State quite as hard, as Washington is more Bordeaux-variety country.


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