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North Bay Business Journal

Monday, March 10, 2014, 6:20 am

Could Napa vineyards sell for $1M an acre by 2050?

Target suggested by 68-year appreciation pattern, little planting

By John Bergman

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    Commentary by John BergmanBy the year 2050, I believe that someone will pay more than $1 million for an acre of producing vineyard land in Napa County and $775,000 in Sonoma County.

    My guess is that the prize Napa County properties would be located in Rutherford, Oakville, St. Helena or somewhere mid-valley.

    I know I will get nasty phone calls, letters, emails, texts and tweets that will dispute my projections. I don’t have a crystal ball, but I do look at trends. If you look at my graph, you will see that it clearly shows that my projections are right on course for $1 million per acre before the year 2050.

    Of course, we could have another historic downturn, like in 2008, and then all bets are off.

    Appreciation through 2008

    100 years of vineyard values by Bergman Euro-National

    Average per acre values of producing vineyard in Napa and Sonoma counties are set to soar as demand for high-end outstrips new vineyards, according to deal broker John Bergman.

    However, the statistics from 1950 to 2008 (68 years) show nothing but appreciation. The vineyard that was worth $1,000 an acre in 1950 will be worth $1 million an acre after 100 years, in 2050.

    Back in 1950, an acre of producing vineyard land in Napa County could be purchased for an average of $1,000 per acre. In 2013, and even after a disastrous economic crash, Napa County an acre of producing vineyard land was selling at around $200,000 per acre. With trend information I accumulated going back to 1950, I am able to see another large goal in the future.

    $100,000 an acre by 2000

     In 1993, the average price of planted and producing vineyard in Napa was around $75,000 an acre. The trend line from 1950 to the that point in time indicated an appreciation of 100 percent to 300 percent every 10 years.

    If that rate of appreciation continued, by 2000 Napa County growers would have planted and be looking to sell producing vineyards priced at $100,000 an acre. In 1993 I wrote an article with that prediction.

    I immediately received phone calls and letters from many vineyard and grape growing institutions in Napa County, telling me that I was inflating the market and urging me to retract this projection publicly. I didn’t. By mid-1998, Napa County vineyards were selling for more than $100,000 an acre.

    Now, I likely am stirring up another beehive.

    Vineyards a good investment?

    I will promise you that if I’m wrong and you can find me in 2050, I will buy you a bottle wine. But I probably would be the world’s oldest man by then.

    I get asked every day if vineyards are good investments. To address this, all I have to do is show the vineyard sales history from 1950 through 2013.

    When I came to Napa Valley in 1987 after 20 years in residential and commercial real estate on the Peninsula, I was curious about the values of all these vineyards. I wanted to know the appreciation of vineyards over the years, whether they were a good investment and how to measure vineyard cash flow from the vineyard.

    Coming from a commercial background, I incorrectly was thinking of internal rates of return, cap rates, gross multipliers, present investment vs. future dollars, and return on investment. All around me were hundreds of acres of vineyard land with varietals of every kind, and I had no idea what they were worth at the time or what they had been in the past.

    As I see it, they aren’t making any more land to plant winegrapes in Napa or Sonoma counties. Within these two premium grape-growing regions, values can only continue to climb.

    John Bergman owns Forestville-based vineyard and winery brokerage Bergman Euro-National, started in 1987.

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    Comments

    1 Comment

    1. March 11, 2014, 10:11 am

      by Kurt Burris

      When I was at UC Davis in the early ’90s, a guest lecturer mentioned that to capitalize a vineyard investment, your retail price needed to be the price of an acre of vineyard divided by 1000. This would mean the wine would 1K a bottle. I think we will see examples of that (and in the market, not at the Napa Wine Auction) well before 2020, much less having to wait until 2050.


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