The Race for Filmable Space is on Among Producers and Institutional Investors Alike
October 5, 2020 3 Minute Read
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If you had told me 20 some years ago that the next big “space race” in the commercial real estate scene would be centered around sound stages, I would have thought you were crazy. But today content creators and institutional investors alike are flocking to this sector once almost exclusively dominated by studios.
Sure, the movie and television industry has been a major driving force here in Southern California for decades, and Hollywood is what generally comes to mind when one thinks of Los Angeles. But the explosion of content with the advent of video on-demand streaming has precipitated an insatiable appetite for media-oriented commercial real estate here in SoCal – especially filmable space.
Put simply, streaming video on-demand changed everything. From 2016 to 2020, media companies have leased 6.8 million square feet of office space in Greater Los Angeles. Companies like Netflix and Amazon have helped double the office footprint of streaming companies from 1.9 million square feet to 3.7 million square feet during the same time span. With both traditional movie studios and streaming companies competing for everyone’s attention, the demand for production space has never been greater. The occupancy rate for studio space in the Greater LA region has been well over 90% for several years now, according to FilmLA. And, according to CBRE research, there are more than 5.5 million square feet of sound stage space in the LA market.
Let’s place that last figure in perspective: If you were to combine all the sound stage square footage from New York, Georgia, Louisiana, and Canada together, it would surpass Greater LA by merely half a million square feet. That’s just how much of a juggernaut the film scene here is—and most of that space is spoken for. The tightening of available sound stages was hard enough during the best of times, but with the COVID-19 pandemic shutting down Hollywood for months, the level of pent-up demand has reached a fever pitch.
With space at a premium in the largest filming market on the continent, studio operators and production companies are starting to look to creative solutions and increasingly embracing adaptive re-use of retail or industrial space for sound stages. Case in point? Earlier this year, the inside of a vacated Costco in Canoga Park was transformed into an alien world for one of the blockbuster Marvel superhero movies, and Hollywood-based Siren Studios re-purposed a handful of old industrial buildings into sound stage space.
Yet not just production companies and operators are helping to heat up the market. Landlords and investors are also changing the tone of the conversation. In June, Hudson Pacific Properties sold a 49% stake in their Sunset Gower, Sunset Bronson, and Sunset Las Palmas Studios to Blackstone at a valuation of a staggering $1.65 billion—the biggest studio sale in Los Angeles County to date. This was, and still is, a huge deal. Not just from a dollar value but because the deal is a ringing endorsement for the desirability of production space as an in-demand commercial real estate asset.
The institutional interest in sound stages is but one indicator of the continued maturation of the region’s media and entertainment ecosystem. Even amidst the COVID-19 pandemic, content creators have continued to double down on investments throughout Los Angeles. Take for instance the handful of office campuses under development across the city for the newest generation of content providers including some of the world’s the largest streaming companies. These landmark projects and other exciting developments continue to move forward in the Los Angeles marketplace. Demand has never been higher in this segment, and pandemic or not, the “space race” for content creation is clearly well underway.