From Bits to Billions. SoCal’s Video Game Scene is Full of Untapped Potential for Commercial Real Estate

In the early days, video games meant hazy smoke-filled arcades or guiding a pixelated plumber across a fuzzy television screen with a simple two-button controller in your hands. Back then, video gaming was seen as just a passing fad on par with Cabbage Patch Kids or the Smurfs; in fact, in 1983, the video game industry contracted so severely that it seemed probable it would vanish altogether. Fast forward nearly three decades later, and it’s clear no one would make that claim today as gaming raked in $950 million globally last year alone. Gaming isn’t going anywhere, and neither are the commercial real estate opportunities it creates.

Gaming is especially hot in Southern California. While our region is generally more associated with the film industry, gaming is a rapidly growing sector in this region. The greater Los Angeles metro is home to nearly a million people who work in the creative sector in some capacity, according to CBRE research. Of those, more than 150,000 are focused on technology. This has led to the emergence of approximately 140 unique gaming companies, including such headliners as the makers of World of Warcraft and Overwatch, Activision-Blizzard. As of 2020, gaming developers and publishers occupy more than 3 million square feet of office space regionally.

And just as gaming evolved away from arcade cabinets into home consoles and now smart devices, the commercial real estate requirements of this industry are pushing beyond office space and into entirely new arenas—literally. Esports, a form of competitive gaming, has exploded in popularity over the last decade and is now treated with the same pomp as real-life sporting events. In fact, younger generations spend more time watching gaming video content than sports. The idea of an arena packed with people watching teams playing video games might strike some as odd or even unlikely—but the concept is very real. In Burbank, the Blizzard Arena is a 50,000 square-foot facility that has accommodated upward of 500 excited fans at a time. Another 26,000 square foot venue is planned to open in Hawthorne in the near future. And this trend isn’t just isolated to L.A. Philadelphia, for instance, is set to be the home of a 60,000 square-foot arena for a single esports team.

The coronavirus pandemic naturally led to concerns about the viability of esports arenas. Would there still be an audience waiting in the wings to pack stadiums to the brim in order to see their favorite teams duke it out over keyboards and mice? The answer has been a resounding yes—from game makers, players, and fans alike. A handful of gaming-related companies we spoke with recently have expressed confidence in the region’s strength as a hub for talent and creativity. “We’ve found the talent in Los Angeles is almost unmatched in the country, given the various game and tech-related businesses in the Greater LA area,” said Jeff Poffenbarger, Chief Operating Officer of LA-based game developer Mythical. “That’s why we continue to invest in our team in LA; it’s a talent rich area.” Most are also considering a more normal return to the office likely once COVID-19 has fully passed.

“Like most fields, the gaming industry had to adapt,” said Stephanie Harvey, Director of Development and Outreach with esports organization CLG. “Thankfully, we were able to pivot quicker than some, and we made the best out of a very difficult situation.”

It is our belief, based on the multitude of conversations we have had with developers and gaming companies alike, that the video game industry is going to keep growing and evolving in lockstep with technology. And as real estate experts, it is our job to stay in sync with the demands of the times. Given our years-long experience and deep knowledge of this exciting industry, we aren’t expecting the dreaded “game over” screen any time soon and instead are certain of the coveted “high score.”