The cameras are rolling and the Hollywood film industry is slowly coming back, resulting in high demand for studio space, new investor interest and higher rental rates.
FilmLA, the city and county of Los Angeles nonprofit film office, has announced approximately 1,127 license applications for 829 unique projects since receiving the green light from the authorities to restart treatment in June after the coronavirus stops. Monthly demands rose nearly 40% in August and, with nearly 200,000 workers employed by media and entertainment companies last year, the return of production to Hollywood will be a major catalyst for the economic rebound in the region.
The hiatus from filming earlier this year added to the existing production bottleneck and increased demand for studios and sound stages. Strict social distancing regulations have led productions to need more space to distribute people, as well as increased consumer demand for more content because people matter more. heavily on home entertainment.
CBRE has seen a substantial increase in rental and sales activity over the past two months, and Executive Vice President Craig Peters said the struggle for available space is clearly driving up rates.
With the entertainment engine returning to an already low vacancy market, vacancy rates are falling even more, leading to upward pressure on rents, he said via email.
In an interview with Commercial Observer, Sam Nicassio, president of LA Center Studios, estimated an increase of around 10 to 15 percent in rents due to rampant demand and the overall production backlog. He said he has seen activity increase at about the same rate as FilmLA.
According to CBRE, over the past three years, demand for production facilities has led to an approximately 20% increase in rents in sound rooms owned by Hudson Pacific Properties (HPP), surpassing most other regional real estate assets. . And Bill Humphrey, senior vice president of HPPs Sunset Studios, told the CO the company has been increasing rental rates since the start of the pandemic.
Meanwhile, HPP has collected 100% of the rent from its studios, where shows are now resuming. Humphrey said just four weeks ago that his company had no scheduled production. But now about 60% of its production schedule is set with shows from Netflix, CBS, ABC, HBO, and NBC restarting production or starting new ones soon.
We should see about 80% of our stages accelerate from the last week of September to the second week of October, he said. Even with COVID, people are signing new deals and committing to milestones. By the time we get to mid-October, we should be 100% full on stages.
He explained that a pilot is returning from the shows that were on stages in February and that are due to come back and finish the rest of their shows. But another factor is that productions are taking more stages now because it is easier to protect the actors and the workers.
We have two instances, one with ABC and one with NBC, where they’ve actually rented additional stages to us so that they can increase their stage capacity, said Humphrey. We’ve seen a lot of streaming companies push the product back to Los Angeles, where most of the actors live so they can be local. […] Many actors are tired of traveling on planes or being in hotels for long periods of time.
Indeed, CBRE Peters also said the company is seeing an increase in its activity with production companies and studio operators, and that this is clearly the result of pent-up demand, leading to a battle to find filming options. . Production space in the Los Angeles metropolitan area totals 5.5 million square feet, by far the highest concentration in the United States and CBRE expects supply to increase by at least 10% within months coming up with new developments and conversions.
With soundstage vacancy still at low numbers, CBRE said production companies are increasingly turning to alternative filming locations and adaptive reuse opportunities. Peters said virtually any vacant industrial building is now up for grabs as a potential studio alternative.
With most stages in the area already full, productions are working to find vacant spaces available for immediate occupancy, Peters said.
Industrial properties with high ceilings and large unobstructed floor patches, as well as once neglected facilities in downtown Los Angeles and the northern part of the county, have received additional attention, CBRE reported.
Eric Willett, regional director of research for CBRE, said studio operators and developers are also looking for opportunities for adaptive reuse to create additional production space. CBRE cited Siren Studios in the heart of Hollywood as an example of adaptive reuse of off-studio space, with over $ 50 million invested in upgrades.
Earlier this year, CO announced that Blackstone would acquire a 49% stake in Hudsons Sunset Studios for $ 1.65 billion. It was the biggest studio deal ever in LA County, and Willett said it definitely catapulted the production space to the top of investors’ minds, if it wasn’t there already. Peters added that CBRE has seen local and outside investors actively seeking existing opportunities and land for studio space.
Film and television productions are also one of the largest occupants of office space in the Los Angeles area, according to CBRE, with the industry occupying 17.7 million square feet. Reed Hastings, Founder and Co-CEO of Netflix, told the the Wall Street newspaper last week he failed to see the benefits of people working from home and expects employees to return to the office once a vaccine becomes available. He said, however, that a four-day in-office and one-day-at-home hybrid model could become the new normal.
Nicassio, of LA Center Studios, also said he hopes to bring his 200,000 square feet of traditional office space back into service. Additionally, he said he didn’t expect the entertainment industry to maintain new work-from-home strategies as people benefit more from collaboration, although he said a more hybrid model could result.
This is where it was going to end, he said.
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