Commercial property

Developing the next generation of studio apartments in Los Angeles – Commercial Property Executive

Jeff Stotland, executive vice president of Global Studios at Hudson Pacific Properties. Image courtesy of Hudson Pacific

It’s no secret that the pandemic has accelerated our online media and entertainment consumption, but the rise of streaming services was well underway before 2019. As one of the major entertainment hubs of the planet, California has seen massive investment pour into the sector over the past decade, manifesting itself in a wave of new studio development projects. Research from the School of Business at the University of California, Riverside shows that California’s creative economy has created more than 70,000 jobs since 2015, while wages within the industry have increased by nearly 40 % over the same period.

“The appetite for content during the pandemic, coupled with production delays at the start of the pandemic, has created significant pent-up demand for production,” Jeff Stotland, executive vice president of Global Studios at Hudson Pacific Properties Told Commercial Real Estate Manager.

Development accelerated in traditional entertainment hubs, with secondary markets also seeing increased investment and new construction. Los Angeles, however, remains the dominant force in the industry. According CBRE and MovieLA, Los Angeles has approximately 5.5 million square feet of production space, the most of any major market in the world. Yet this is not enough to meet current demand levels.

The production space is only one piece of the puzzle. “Beyond the sound stages, successful productions require significant amounts of additional real estate, including warehouses, mills and offices, in addition to space for cabinets, decorating sets and space storage – and the list of needs will only grow longer as the industry continues to evolve.”, Peter Rumbold, Director of shadow box and Head of Real Estate at Commonwealth Asset ManagementTold CPE.

“Global demand for content continues to rise, and with it the demand for sound stages, production offices and Class A space adjacent to the studio,” Stotland added. To meet this growing need for content, new construction is beginning throughout the Thirty Mile Zone (TMZ), the radius around downtown Hollywood where film production was historically located.

Peter Rumbold, Director of Shadowbox and Head of Real Estate at Commonwealth Asset Management. Image courtesy of Shadowbox

In previous decades, when little production space was available in the region, industrial space served as an outlet. Production companies would lease available industrial buildings for three to 12 months to shoot, according to Craig Peters, vice president of CBRE Los Angeles. “Today, however, you have virtually no industrial inventory available, and if anything becomes available, this landlord will want a five- to 10-year lease commitment and will not consider short-term leases,” added Peters.

Hence the success of retraining companies that lease industrial property on a long-term basis, equip them with sound sets, then sub-let them on a short-term basis to production companies. Another aspect is the amount of capital looking for studio development opportunities. Today, the studios are considered a stable anchor tenant in Los Angeles, with billions of dollars pouring into the industry.

State-of-the-art production space

Hudson Pacific Properties is among many other developers currently expanding their sound footprint. Stotland said CPE that the upcoming purpose-built Sunset Glenoaks is a natural extension of the company’s Sunset Studios, which currently total approximately 3.5 million square feet, including offices and 35 stages. The Sunset Studios is jointly owned by Hudson Pacific and funds managed by black stone.

“Content production tenants are looking for modern, conveniently located studios. Some features we see in high demand include large soundstages with high headroom, highly efficient, stage-adjacent support space, and technology infrastructure,” Stotland said.

The Sunset Glenoaks project, estimated to cost $190 million, will include seven flexible stages, located in Sun Valley. These will be suitable for film and television sound stages, each measuring between 15,000 and 21,000 square feet with headrooms of 35 to 40 feet. It will include an additional 120,000 square feet of support space adjacent to the stage, which includes offices, mills, parking and truck loading space. Sunset Glenoaks will be built to meet LEED certification and 100% carbon neutral operations. The project is scheduled for delivery in 2023.

Rendering of Sunset Glenoaks. Image courtesy of Hudson Pacific Properties

Peters points out that studio development in Los Angeles is focused in two directions: purpose-built stages and industrial conversion stages. Both approaches have been affected by the minimal supply of available land in the region, with the level of demand contributing to record land prices. “Conversions have also been a significant driver of demand for existing industrial space, as well as e-commerce and together have reduced industrial vacancy in the TMZ to virtually zero percent, driving record building sales prices. and grounds,” Peters said. CPE.

Another major studio development is currently underway as part of Atlanta Shadowbox Studios’—formerly known as Blackhall Studios – portfolio, occupying a 93-acre parcel in Santa Clarita. The company received a $500 million investment from Silver Lake this year to support its growth. Plans call for 19 sound stages comprising 1.3 million square feet of production and support space. Shadowbox locations also provide on-site production services, such as stage crew, lights, and equipment. “Our campus is designed with modern productions in mind and will be one of the first fully integrated, purpose-built production facilities for the Los Angeles market in decades,” Rumbold added for CPE.

Next Shadowbox location in Santa Clarita. Image courtesy of Shadowbox

The project is Shadowbox’s first foray into the Los Angeles market, with the company also expanding into Atlanta – 22 sound stages, 1.2 million square feet in progress – and London – 1 million square feet Shinfield Studios. Additionally, Shadowbox expects a total of $1.5 billion in investment for its global growth, with the funds to be used for additional expansions in other markets, as well as adding services to the terrain such as lighting and the rental of handles.

“The hardest part of entering the LA market was simply finding a site that suited the type of development we were targeting,” Rumbold added. “Los Angeles is a dense urban market with very few large-scale undeveloped parcels of land remaining.”

Growing up in Los Angeles

Mikel Elliot, CEO of Quixote Studios. Photo courtesy of Quixote Studios

Quixote Studios, one of the largest sound stage and production services providers and operators in Los Angeles, also expanded its presence this year. Quixote operates more than 24 stages in the subway, with over 1 million square feet of production space, including sound stages, reels, prop and equipment storage space, as well as a flexible office. “We purpose-built some and converted high-rise warehouses into Class A stage space,” said Quixote CEO Mikel Elliott. CPE.

The latest additions to Quixote’s footprint is an expansion to its San Fernando Valley site named Q-NOVA, which opened in 2019 on a 10-acre parcel. The company added 75,000 square feet of studio space and 20,000 square feet of office space to this location, which now spans 20 acres and includes a total of 10 sound stages, 60,000 square feet of office space, supporting mills and warehouses, as well as parking. Quixote’s clients include ABC/Disney, HBO, Sony, Paramount, NBC Universal and Warner Bros.

A week ago, Hudson Pacific announced its acquisition of Quixote Studios for $360 million, before closing costs. Hudson acquired Quixote’s entire portfolio – which includes 60 stages in Los Angeles and London – as well as its Production Services Division’s transportation fleet of more than 1,400 trailers, trucks and specialty vehicles in Los Angeles, Atlanta and Albuquerque.

Mikel Elliot will retain a leadership position at Quixote, saying the companies’ shared goal is to elevate the production experience of teams on their collective stages. “Together, we will continue to innovate, inspire and solve new production challenges in the age of streaming content and beyond,” Elliot said in prepared remarks.

With this agreement, Hudson Pacific aims to complement the capabilities of its Sunset Studios, expanding the offering of full-service sound stages and production services in key global markets. “Quixote strengthens our reach to capture strong secular demand for studios and related assets, including excess demand in our Sunset Studios locations, and allows us to realize immediate economies of scale,” Stotland added in a prepared statement. .

Nothing better than being at home

CBRE’s Peters said CPE that developers continue to face many challenges in the market despite the massive demand for content. As more production space is needed, rents have risen dramatically and supply shortages have pushed building and land prices to record highs, with some submarkets seeing values ​​more than double in the past two last years.

According to Elliot, the right mix of affordability, desirable location, scale of ownership, and bogged down rights and permitting processes also add significant challenges for developers.

Despite all of this, in addition to rising construction costs, inflation and supply chain issues, capital continues to flow into the Los Angeles film production industry. Other projects have been announced by Sylmar Studioswhich is building a $500 million, 27-acre production facility in the town of Sylmar, while Eastern Studios—part of East End Capital – announced last month that it would build an $800 million film studio in the arts district.

Atlanta, New Orleans, Albuquerque and Vancouver are other major North American markets experiencing significant growth, while Europe and Asia have also seen their fair share of development boom. All of these markets offer some sort of incentive to attract more investors, but, as Peters points out, “one comparative advantage that California has over other places is that a lot of top talent in front of and behind the camera resides in Southern California Dorothy’s famous phrase “there’s no place like home” can be a deciding factor for location.