How the California fires are remaking the L.A. economy

Summary
The blazes have sent a chill through all strands of the local economy. But for some, the tragedy has brought an unexpected boost.On a typical weekday, lunch hour is bustling at Toscana Brentwood, a popular restaurant with the Hollywood elite where it isn‘t uncommon to see Disney Chief Executive Bob Iger dining while agents table hop looking for the next big deal.
Since the fires that have destroyed the Palisades and forced much of neighboring Brentwood and Santa Monica to evacuate, Toscana is a ghost town. With no Aston Martins or Teslas to park, the valets are talking among themselves.
“We have a lot of customers who have lost their houses," said Roberto “Roby" Facciolla, general manager and partner of Toscana during an unusually quiet lunch hour on Monday. “Everybody is in shock."
Just a few miles away from Toscana, the hotels and motels in Santa Monica are packed with evacuees from the fire. The lounge of the iconic Shutters on the Beach hotel where even the lowest-priced rooms can approach $700 a night is packed with families and the occasional dog. Rents are soaring as displaced residents scramble to find longer-term housing.
The project of rebuilding Pacific Palisades, Altadena, and other parts of greater Los Angeles will likely cost billions and take years. Like past disasters, the wildfires will create economic winners as well as losers.
The loss column is already painful and wide: Scores of businesses have been destroyed or closed, some for good. People who have been displaced by the fires are struggling to get to work—if their work is still there. For businesses that managed to survive the blazes, the displacement of tens of thousands of people across Los Angeles County has meant the sudden evaporation of their customer base.
A sign of support on the window of Capsule Shop in Brentwood, Calif.
The number of hours logged by employees across Los Angeles on Monday was down 8.9% from a week earlier, according to Homebase, a scheduling-software company with mainly smaller-business clients.
The U.S. is so large that even major disasters tend to have little noticeable effect on gross domestic product. That said, Los Angeles County’s GDP came to $962 billion in 2023—the highest of any U.S. county. If it were a country, it would rank higher than Switzerland.
“This is a large, very densely populated, highly productive economy, so it will be costly," said Moody’s Analytics chief economist Mark Zandi.
Natural disasters also create some short-term winners. “LA Strong" t-shirt sales have been brisk. Enterprising street vendors have emerged to help feed first responders, as have food trucks. Clean-up crews will have no shortage of work for the foreseeable future. And hotels throughout the area are bustling.
“We have been a haven for so many people who want to stay close to their homes," said Aileen Carreon, vice president of sales and marketing for Shutters on the Beach and the neighboring Casa Del Mar hotels. The hotels have evacuation rates advertised on their sites, reduced to give those in need of a place a bit of a financial break.
A few blocks inland at the more modest Sea Shore motel on Main Street, business is also booming with its two dozen rooms booked primarily with people seeking shelter.
Roberto ‘Roby’ Facciolla, general manager and partner of Toscana.Since the fires that have destroyed the Palisades and forced much of neighboring Brentwood and Santa Monica to evacuate, Toscana is a ghost town.
“This was the slowest January we’ve had in the history of owning the motel, and then two days later we were completely filled with evacuees," said co-owner Sonia Metz. The hotel has also slashed rates by as much as 30%. She waived pet fees as well.
At the same time, some hotels have seen more cancellations than usual from business travelers and tourists looking to visit in what is the off-season for Southern California.
Businesses that cater to tourists also report declining sales. TMZ, which runs a popular tour of celebrity homes and hotspots has seen a decline in customers over the past week, a person familiar with the matter said. A TMZ spokeswoman didn’t respond to requests seeking comment.
Airline ticket sales to the area have also dipped, said Delta Air Lines President Glen Hauenstein, during a call in the immediate aftermath of the fires. Longer term, he predicted that the rebuilding would lead to an uptick in travel to Los Angeles, as it has in other areas hit by disasters.
Hollywood studios such as Disney were closed during the first several days of the fires, and production was shut down on some studio lots. Shows that were affected included ABC’s “Grey’s Anatomy" and Max’s “Hacks." While offices and studio lots are open, it will be some time before the engines are running at full steam.
The International Alliance of Theatrical Stage Employees, the labor union representing the bulk of crew members and technicians, said it has more than 5,000 members in the fire and evacuation zones and 300 members who have lost homes.
San Vicente Boulevard in Brentwood, Calif.
The long-term impact for the industry remains unclear. But the housing challenges could further slow down an industry that is still trying to recover from not only the Covid-19 pandemic, but also the writer and actor’s strikes, which further delayed production of movies and television shows.
In Altadena, parts of which were ravaged by the Eaton fire, the small business districts on Lincoln and Lake Avenues are mostly shut down.
Neighboring Pasadena businesses have also slowed to a crawl. Colorado Boulevard, part of the historic Rose Parade route, is also seeing declines in foot traffic. Restaurants that would normally be filled with businesspeople or tourists were mostly empty last week.
Retail businesses and bars and restaurants in areas affected by the fires have been closing early in acknowledgement of the decline in customers.
“I’d say we’re running at 30% of what would be normal," said Paul Carroll, who owns the restaurants Taisho, Casita and BLVD on Ventura Boulevard in Sherman Oaks, Calif., which draws much of its clientele from Brentwood and other areas hit by fires. “We’ve been closing early every day. By eight o’clock we’re shutting down and sending people home."
In addition to fewer customers, businesses have had to make do with fewer employees as well.
“There has been no shortage of staff disruptions," said Travis Strickland, chief operating officer of Alliance Hospitality Group, which owns several restaurants affected by the fires including the upscale Baltaire restaurant in Brentwood and Encanto in Los Feliz, which lost power for several days.
Travis Strickland at the Baltaire restaurant in Brentwood, Calif.Workers at the Baltaire restaurant, which was affected by the fires.
Data from restaurant-reservation company OpenTable show that the daily number of seated diners at Los Angeles restaurants over the week ended Tuesday were on average over 50% below year-earlier levels.
Over time, cleanup efforts and the rebuilding of lost homes will likely more than make up for any negative near-term effects on economic activity, says S&P Global Market Intelligence economist Ben Herzon. Because GDP is a measure of production, perversely, destroying a home and rebuilding it can provide a boost to a local economy.
“There is a lot that is not measured in the numbers that can never be recouped," said Herzon.
The speed with which rebuilding could take place is uncertain. Economists at Goldman Sachs note that following past large wildfires, building permits and construction starts for new homes picked up within several months, whereas for hurricanes there has tended to be a longer lag.
The idiosyncrasies of Los Angeles could create delays, however, despite California Gov. Gavin Newsom’s order, signed this week, suspending some environmental regulations to rebuild homes and businesses more quickly.
“It really could take three to five years to build these homes," said Matthew Kahn, an economist at the University of Southern California.
For many businesses, the speculative timing of the rebuild just leads to more uncertainty.
“This community is a big portion of our customer base; we’re left wondering what that will look like in the future," said Alliance’s Strickland.
Write to Joe Flint at Joe.Flint@wsj.com and Justin Lahart at Justin.Lahart@wsj.com