Home New mexico real estate Studio wars: battle of the streamers sparks real estate frenzy

Studio wars: battle of the streamers sparks real estate frenzy


The coronavirus pandemic injected new urgency into the frenzied streaming battle underway in Hollywood: Audiences were stuck in their homes and looking for television as an escape, but coronavirus restrictions prevented the filming of new material and created a bottleneck of production bottlenecks.

With filming now back to pre-pandemic levels, Hollywood studios are scrambling to produce shows. But a parallel race has emerged for filming locations, drawing private equity groups into what was previously a niche market.

Investors, including Blackstone and TPG, have committed more than $ 4 billion in recent months to acquire sound stages – large warehouse-type buildings where producers place sets – in entertainment centers across North America and in Europe, according to real estate broker Jones Lang LaSalle.

“I’ve never seen this type of business flow,” said Carl Muhlstein, CEO of JLL. “It coincides with the post-Covid backlog of content, the changing studio economy and the globalization of the industry.”

The streaming wars are behind the boom as Disney, WarnerMedia, Netflix, Amazon and others invest tens of billions of dollars to become a leader in the future of entertainment.

In Los Angeles, demand for TV show locations far exceeds supply: churches, abandoned shopping malls, industrial warehouses and even a former Ikea store have been repurposed as production facilities.

Supply tension has tightened as streamers shifted demand towards TV series and away from movies. TV series are more likely to be shot on film sets in Los Angeles, where the actors live year-round, while films are often produced in other locations.

Blackstone, the world’s largest real estate investor, has said studios are among their top choices for investments.

“This is one of the most exciting themes we pursue in our global real estate business,” said Nadeem Meghji, real estate manager for Blackstone Americas. “We’re still in the early stages of the megatrend around content creation and within the studio business as well.”

In August, Blackstone and property developer Hudson Pacific committed nearly $ 1 billion to develop a 91-acre site in north London. This follows Blackstone’s June 2020 investment in 2.2 million square feet of space in Hollywood worth $ 1.65 billion.

Streaming made these steps more attractive to institutional investors for several reasons.

Ten years ago, studios rented space for several months to shoot a show with no guarantee that it would last beyond a single season.

Netflix has shaken up this tradition and instead signed long-term leases to create production centers in Los Angeles, Vancouver and Albuquerque, New Mexico.

Because Netflix has planned thousands of TV series years in advance, the streaming giant can confidently commit to a multi-year lease. Amazon and Apple followed suit, both signing leases on a production space in Los Angeles for their streaming businesses.

“It’s much easier to take out a 10-year lease with Apple than it is to take out a series of six-month leases with some risk,” said Eric Willett, Managing Director of RCLCO Real Estate Advisors. “Netflix has changed the market for everyone.” Willett estimated that up to a third of new leases were for more than three years.

CBS Studio Center, where ‘Seinfeld’ was filmed, was acquired for $ 1.85 billion © Bing Guan / Bloomberg

With Los Angeles soundstage occupancy rates exceeding 95%, according to JLL, producers have had to get creative to find locations. Sound stages are typically empty, cavernous buildings with high ceilings, making industrial warehouses a viable option.

A former Ikea store in Burbank, California has been turned into a television production site where shows such as Netflix The ground is lava, in which contestants must navigate rooms filled with red mud, were recently filmed.

“Covid has really exacerbated the demand for all types of content, and it turned out that there just wasn’t enough soundstage studio space,” said Jennifer Frisk, managing director of the broker. Newmark Knight Frank, whose clients include Amazon.

Last month, TPG spent more than $ 1 billion to acquire Cinespace Studios, which owns 2.9 million square feet of studio space in Toronto and Chicago, according to two sources familiar with the deal.

The purchase came two months after TPG agreed to buy a significant stake in German studio Babelsberg, where Fritz Lang’s 1927 masterpiece Metropolis was shot.

A former Ikea store has been turned into a production site, where television shows such as

A former Ikea store has been turned into a production site, where TV shows such as Netflix’s ‘Floor is Lava’ were filmed © Adam Rose / Netflix

The most active buyer in the market is Hackman Capital, a real estate investor in Los Angeles, which partnered with Square Mile Capital in November on deals worth more than $ 2 billion.

The investor group acquired Scotland’s largest studio as well as Kaufman Astoria Studios in New York and CBS Studio Center in Southern California, where Seinfeld was shot. CBS’s $ 1.85 billion price tag was $ 500 million higher than ViacomCBS had forecast when it went on sale in August.

“These are high quality assets that are not replaceable,” said Craig Solomon, managing director of Square Mile Capital, which, through the joint venture with Hackman, has closed more than $ 7.5 billion in contracts. studio space since 2018.

Rental prices for sound sets jumped during the fury. Renting a 10,000 square foot office space in Burbank would cost around $ 500,000 per year, while studio space would cost at least double, according to Newmark.

But while other categories of real estate are valued in terms of revenue per square foot, the valuation of studio space is more murky. Homeowners will charge growers for additions such as lights, catering and ‘getting started’ technicians, services that can account for up to half of a property’s rental income, industry executives say. .

As media groups like CBS and Viacom consolidate, they sell overlapping studios, freeing up money to spend creating TV shows to store their streaming services.

Yet legendary Hollywood studios – Paramount, Universal, Warner Bros, Disney and Sony – have retained their legendary studio grounds, where classics such as Casablanca and The sound of music were filmed. These bundles contain dozens of sound stages as well as exterior streets built as generic backdrops for shows, wardrobe and catering trucks, post-production spaces, and offices.

That too could change if the market continues to grow. “It wouldn’t shock me for the next five years if any of these big lots sold,” said a real estate veteran. “Entertainment is consolidating. Do we really need five lots?