Experts agree there is one asset type, in addition to industrial, which investors are keen on now: studios.
As streaming services are creating an increasing amount of content, real estate developers are finding ways to keep up with the surge in demand for more production space.
“The need for content is like no time before,” said Craig Peters, an executive vice president at CBRE Group Inc. “All of these different distribution channels that didn’t exist five years ago need content and need a lot of content.”
And that increase in demand has made developers and property owners interested in the asset type as well.
“It was one of those Covid-proof or even Covid-driven businesses,” said Nicole Mihalka, a managing director at Jones Lang LaSalle Inc. and the chairwoman of the Hollywood Chamber of Commerce.
Mihalka said there has always been interest in stage space in L.A., but one thing that has changed is that more institutional capital is now interested in soundstages.
She said this started when Blackstone Property Partners acquired a 49% stake in Brentwood-based Hudson Pacific Properties Inc.’s Hollywood portfolio.
Another major change, experts agree, is stages being leased for longer periods of time. Traditionally, productions would lease for a few months at a time, but now they are doing so for longer time periods.
“Instead of these six- to 12-month leases that productions typically sign for a lot of the real prime, core stage properties, a lot of these streamers are making long-term commitments,” said Sam Glendon, a first vice president at CBRE.
Some are signing multiyear leases.
All that interest in studios has led to a plethora of studio project announcements in recent years.
When it comes to existing properties, Culver City-based Hackman Capital Partners and affiliate MBS Group are planning a $1.25 billion investment in Television City, which could include up to 15 soundstages. Hudson Pacific and Blackstone, meanwhile, are roughly doubling the size of the Sunset Gower Studios in Hollywood.
Developers have also announced also announced plans to build new studio projects in L.A. County as well. East End Capital has filed plans for a studio at 2233 Jesse St. in Boyle Heights with four soundstages, office space and storage. West Hollywood-based Bardas Investment Group and Bain Capital are planning Echelon Studios, a $450 million project at a former Sears store in Hollywood. And Atlas Capital Group is planning the $650 million 8th and Alameda Studios with 17 soundstages at the Los Angeles Times downtown printing plant. There are many other plans in the works as well.
“They see that this is a timeless type of real estate. Soundstages have been around for 100 years and will continue to be a product that is desirable,” Mihalka said of why there are plans for so many stages now.
But experts caution that not all projects being discussed now will come to fruition.
“Nearly daily there’s an announcement on some new studio project,” Peters said. “Some of those that are being announced may never happen.”
Soundstages and studio campuses, experts agree, can be difficult to build.
“First and foremost, you need quite a bit of land,” Mihalka said. “They are usually looking for much bigger sites. Critical masses of stages is important.”
And excess land for trucks, parking and circulation is also important.
She added that the size requirements as well as the cost to build soundstages limits what’s actually built.
“I think there’s a lot of stuff in the pipeline, but when these developers pencil it out, I don’t think all of it will get built,” she said.
Still, experts agree that studios are going to continue to be a hot commodity for content producers who want to film here and companies who want to own the valuable real estate.
“You’re going to see more money move into the market. You are going to continue to see record trades … as more money competes for a finite number of deals,” Peters said.
Mihalka said that while she expects demand for stages to continue, what remains to be seen is how many long-term leases there will be for stages moving forward.
She also expects some developers to find it is much cheaper to build distribution and last-mile industrial properties than spec stages, something some developers might do with land instead, especially since industrial is also in such high demand right now.
This summer, developer East End Capital, which is based in New York, filed plans with the city of L.A. for a studio space at 2233 Jesse St. in Boyle Heights. The company is looking to convert a cold storage industrial property into a production studio with four soundstages, office space and storage. The project, which is being designed by downtown-based Relativity Architects, would total 237,000 square feet.
West Hollywood-based Bardas Investment Group and Bain Capital are working on the $450 million Echelon Studios. The project sits on a 5-acre site at 5601 Santa Monica Blvd., which was previously a Sears store, and is expected to have 370,000 square feet of creative office space, four soundstages, a flex stage and 93,000 square feet of bungalows.
Atlas Capital Group is planning a $650 million project, dubbed 8th and Alameda Studios, to redevelop the Los Angeles Times printing plant downtown into a studio campus. The project is expected to have 17 soundstages in addition to feature-screening theaters, executive offices, production workspace, restaurants and fitness amenities on 26 acres. It is being designed by Bastien & Associates Inc.
Culver City-based Hackman Capital Partners and affiliate MBS Group are planning a substantial upgrade to Television City, which Hackman purchased from CBS in 2019. The $1.25 billion investment in Television City includes developing up to 1.13 million square feet of additional space on the 25-acre property. That could include up to 15 soundstages, production offices and support facilities.
The Los Angeles City Planning Commission has approved plans to nearly double the size of Hollywood’s historic Sunset Gower Studios. Roughly 480,000 square feet will be added to the property, which dates back to 1918. It is owned by Brentwood-based Hudson Pacific Properties Inc. and Blackstone Property Partners and is being designed by Gensler.