Real estate is experiencing its own “Netflix effect.”
Case in point, the $750 million sale of the historic CBS Fairfax studio lot — known as CBS Television City— to real estate investment firm Hackman Capital Partners on Dec. 10. That monster deal is but the latest in a larger trend of real estate firms, namely big players like Hackman and Hudson Pacific Properties and mid-sized players like Quixote Studios, scooping up existing studios and production facilities or building entirely new ones to capitalize on L.A.’s local production boom.
In the case of Hudson and Hackman the strategy is to blend class-A office space — and the lucrative long-term leases that go with them — with sound stages and post-production facilities, effectively creating Hollywood-friendly synergy for the town’s newest entrants.
“The vision started in 2007 with (Hudson Property CEO) Victor Coleman’s acquisition of the Sunset Gower Studios,” says Bill Humphrey senior vice president of Sunset Studios for Hudson Pacific Properties. In 2014, Hudson built a Gensler-designed, 14-story office tower next door to the executive building which Netflix now occupies. “He saw — when the market was down — that there would be a need for stages and integrated office space in the future. And he was correct.”
Hudson is now the largest independent studio operator in the country. Netflix, which also lease a portion of a five-story building at Sunset Bronson Studios, announced it will fully occupy the entire 327,913 square feet of space in Hudson’s EPIC tower that is currently under construction. That 13-story office development located at 5901 Sunset Blvd will be completed in 2020.
The Brentwood-based firm also recently unveiled renderings for The Harlow at the corner at Seward and Romaine streets, which will be a new 128,000 square feet office building planned for the Sunset Las Palmas Studios campus, formerly known as Hollywood Center Studios which Hudson acquired in 2017 for $200-million.
But with Hackman’s moves last week, they have signaled that they are gunning for top billing in this space. On the same day that the CBS Television City deal was announced, the firm also launched phase two of their “innovation plan” at the historic Culver Studios in Culver City. That plan will not only modernize the studio originally built in 1918 by Thomas H. Ince, but also double its size from 358,000 square feet to 720,850. Hackman also announced that Amazon Studios has signed a lease for two additional buildings at the campus, expanding its total footprint there to 530,000 square feet.
Buoying this strategy has been record film and television production. According to FilmL.A., 2016 and 2017 were the two best years on record for on-location filming in L.A. and 2018 is shaping up to be just as good if not better. According to research released by FX Networks, a record 495 original scripted streaming, cable, and broadcast series were released in 2018, representing an increase from the 487 shows the year before. And for the first time in TV history, streamers like Netflix and Amazon accounted for the biggest share of all scripted production in 2018.
“The streamers are putting a lot of pressure on traditional studio to find space and some are feeling the pinch,” says Quixote studios CEO Mikel Elliott, who says the demand for studio space is spilling into converted warehouses across the city that were previously abandoned. Quixote is also about halfway through a $40 million development project in Pacoima in the north valley which will result in a new six-acre facility with five state-of-the-art sound stages and almost 20 thousand square feet of office space.
Elliott does not see any slowdown in the near term, citing Apple’s pledge to spend a billion dollars acquiring and producing original TV shows over the next year.“The subscription battle by the end of next year is going to be huge,” he says. “Apple hasn’t even teed up yet and you got to figure they aren’t going to be shy about the spend.”
A version of this story first appeared in the Dec. 18 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.