Hollywood was depleted of studio space even before the pandemic struck.
Now, after a year at home, the appetite for online entertainment, including original content, is growing. So is the demand for high quality sound systems, creative labs and production offices.
How much do consumers are infatuated? COVID-19 drove demand for video streaming to grow 74% year-on-year, according to an October report from CBRE Americas Research, a commercial-real estate services firm.
and Disney + and Hulu platforms and other streaming companies also create their own shows – not to mention old studios, network TV, and advertising preferences – that need every last inch and more of the estimated 11 million square feet of production space in a number of North American cities.
“Content is king,” said Spencer Levy, CBRE’s senior economic advisor. “It’s just getting more important and more diverse every day.”
Watching habits may diminish once consumers return to restaurants and sports arenas, but the trend of streaming 24/7, with viewing on the go and across multiple devices, is expected. will continue.
We’re here now, entertaining us
According to CBRE, the boost to production comes after years of studios operating at more than 90% capacity, and when American media companies plan to significantly increase production budgets for original content, after spending about $ 121 billion in 2019, according to data from the Intellectual Platform Variety. The unique nature of the accommodation recession only reinforces the entertainment industry’s ability to recover from the recession, which attracts long-term investors.
With so much money on the table, Los Angeles and other filming centers are scrambling to attract new business, and they hope to keep backlogged works removed from COVID-19 from moving. out of town.
Entertainment is an extremely important part of California’s economy, adding that production was boosted in the state during the summer, said Colleen Bell, executive director of the California Film Commission. fall and winter, after taking new safety and health precautions. .
“California’s ability to resume production after the COVID-19 shutdown has resulted in fast-paced expenditures that help kick off the economy quickly,” says Bell.
California provides $ 330 million in annual tax credit funding to film and television companies, but media companies could also get additional funding under Governor Gavin Newsom’s pandemic budget proposal.
Speaking from another major film hub, Lee Thomas, deputy commissioner of the Georgia Bureau of Cinema Entertainment, Music and Digital, said production began to return to state in September after ceasing. operating, but by January the state had 12 movies and 39 TV shows. series in different production stages. “We’re too busy,” said Lee.
Previously, entertainment companies hired sound systems on a necessary basis. Netflix has caught up with that trend by starting to regularly receive multi-year leases to keep its production running. Content rivals have followed Netflix, and so have real estate investors.
However, the ongoing real estate appeal of this creative sector is not a foregone conclusion. There is at least one competitor growing outside the entertainment business. Warehouse demand associated with the surge in online shopping and shipping also requires industrial footprints. Building a soundstage costs about 4-5 times the cost of building a distribution warehouse.
The host for the stars
The niche market has a blockbuster deal as the barometer. As Los Angeles is resuming studio production in June after pausing for almost three months, real estate giant Blackstone is planning to buy a 49% stake in Sunset Studios of Hudson Pacific Properties, one of its operations. of Hollywood’s largest film studio.
The deal covers 2.2 million square feet of studio space and nearby $ 1.65 billion of nearby office properties, along with the right to build an additional 1.1 million square feet at the three studio complex.
“Today, it’s one of our most persuasive topics,” said Nadeem Meghji, the head of the private equity firm’s Americas real estate division. Meghji, head of the private equity firm’s Americas real estate division, refers to ownership of studio space to create film, TV and digital content.
Meghji says the lack of land in Los Angeles County means virtually no new studio stock created in the past 20 years. “Essentially, this is a real estate game and critical infrastructure for the production of TV shows and movies.”
“We think we are uniquely positioned to grow our studio footprint, both in LA and a handful of markets in the US and globally,” Meghji told MarketWatch. That reportedly includes other well-known film hubs including New York, London and Vancouver.
“What we like about this,” said the Blackstone chief executive, “is that demand is strong and supply is also very limited.”