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Wednesday, May 25, 2022

Stages in Short Supply

With Walt Disney Co. and Warner Bros. Entertainment – two of the world’s largest entertainment companies – based in Burbank and NBCUniversal headquartered in Universal City, San Fernando Valley residents have long known that the de facto heart of Hollywood is in the East Valley. 

Right now it’s pumping with renewed energy.

Developers, investors, traditional movie studios and support companies are working to build enough soundstages to meet demand from newly launched streaming services, internet programming and other productions.

The boom actually started in the pre-COVID days of January 2019. That month L.A. North Studios opened in Santa Clarita with 143,000 square feet for film production, soundstages and production offices at 27615 Avenue Hopkins.  

“We took the building with the intention of converting the warehouse portion into production for the entertainment industry,” said L.A. North Studios partner John Prabhu. 

In August 2019, Quixote Studios also anticipated the demand for production space by taking a 75,000-square-foot facility in Pacoima originally designed for e-commerce warehousing and turning it into film production soundstages. Quixote will soon take on another 124,000 square feet at a second Pacoima location. 

Today the construction of new production lots in East San Fernando Valley has heated up like never before, with hundreds of thousands of square feet of new soundstages in development or construction. 

“It’s the bright shiny new toy in the (commercial real estate) toybox,” said Greg Barsamian, who heads the studio services division at brokerage CBRE Group with Quixote Studios co-founder Jordan Kitean. 

What’s driving the demand for soundstages is a huge appetite for content by such streamers as Netflix, Amazon Prime Video, Disney Plus and Apple TV Plus. 

“(During the pandemic,) we were all absorbing as much content as we could,” Barsamian said. “I knew once the lockdown lifted, there was going to be a crush (of production). The writers could write their content during lockdown, but you had to wait to produce it.” 

Post-pandemic appetite

According to a Motion Picture Association of America report for 2020, the world’s entertainment market – encompassing both theatrical and home releases –decreased 18 percent because of the pandemic to nearly $80.8 billion from a record high of $98.3 billion a year earlier. And because theatrical had diminished to $12 billion from 2019’s $42.3 billion, digital viewership, which had been steadily growing, took up the lion’s share in 2020 with $61.8 billion.  

Last year, the global total of online video subscriptions reached 1.1 billion, an increase of 26 percent, or 232 million subscriptions, year over year from 2019. 

After a delay of production due to lockdown periods and complications from working during the pandemic, the entertainment industry has bounced back hard. 

And it’s not just the big studios that are ramping up expansions of studio space. 

Institutional capital from investment firms such as Blackstone, Hudson Pacific Properties and King Street Capital Management are getting involved in creating soundstages as they realize the outsized demand for space. Barsamian said that the thirst for content from streamers has changed everything. 

“They’ll lease it (to a Netflix Inc.) in the old style for five or 10 years on a triple net lease. So now the institutional guys go, ‘Alright I get it,’” Barsamian said. 

The East San Fernando Valley appears to be the biggest beneficiary of this trend. 

Warner Bros., which launched its HBOMax streaming service in May 2020, announced last month that Worthe Real Estate Group and Stockbridge Capital will redevelop the historic Ranch Lot in Burbank that the studio had sold to Worthe in a leaseback deal. That project, which will see 16 new soundstages created on 32 acres and cost $500 million, will total 926,000 square feet — the largest studio project in development nationwide.  

This is in addition to Warner Bros.’ Second Century overhaul of its main studio lot – replete with buildings designed by Frank Gehry – due in time for the studio’s 100th anniversary in 2023. 

Other production lot projects currently in development include Hudson Pacific and Blackstone’s Sunset Glenoaks Studios in Sun Valley, a new $190 million studio lot with seven soundstages on 10 acres totaling 240,000 square feet, which also has a 2023 completion date. 

Last month, NBCUniversal announced that Universal Studios will gain eight more soundstages by next summer, bringing its total to 37 soundstages on the Universal City lot. NBCUniversal has already begun creating an 11-story, 350,000-square-foot office building for creative and business offices due in 2023.  

Also last month came news that New York-based King Street Capital Management, Canada-based Alberta Investment Management Corp. and a sovereign wealth fund had entered a $500 million partnership with Glendale-based East End Studios to acquire and develop production studios. The joint venture has identified three locations – two in Glendale and one in downtown L.A. — totaling 750,000 square feet. 

This Special Report features profiles of these transformative developments in the East Valley. 

Outside the Valley

The urge to build studio stretches beyond the Valley region. 

For example, Captiva Partners is creating a 188,000-square-foot facility on 7.3 acres called Reframe Studios in Atwater Village across from Glendale, where the U.S. arm of London-based entertainment giant FremantleMedia – the production company behind “American Idol,” “America’s Got Talent” and “Family Feud” – has committed to a 12-year-lease for a 43,000-square-foot complex. 

And in downtown L.A., Atlas Capital will transform the former Los Angeles Times printing plant into a $650 million, 823,190-square-foot studio lot. 

All of this has unfolded as movie and television production comes back to Southern California. FilmLA, the official film organization of Los Angeles that coordinates the permits for location filming in the L.A. area, reported that production has skyrocketed since 2020, up 141 percent. 

According to its most recent report, the third quarter of 2021 was the third-strongest quarter over the last 26 years, with more than 10,000 days of location filming recorded in the greater Los Angeles area. 

Television production in the third quarter saw a 22.1 percent jump over their pre-COVID average while commercial production had a 15.5 percent leap.

 

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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