Institutional Investors Zero in on Film Studios’ Real Estate

Institutional investors are focusing on the real estate and operation of movie studios, says JLL.

“It’s more than just the big screen that captures investors’ imaginations. The race for content production between the major streaming platforms, from Disney + to HBO, is driving demand for studio space. It is estimated that Netflix alone released more original productions in 2019 than the entire TV industry in 2005, ”according to a recent report by the company.

Carl Muhlstein, international director at JLL’s Los Angeles office, points out the need and explains that studios have high requirements for controlled environments in order to create content. “The utilization of the sound stages has been constant at around 95% since 2015, and with the current boom in online content, the scramble for studio space is ongoing and spills over into empty industrial and retail boxes.”

He points out that the need for heavy asset management for higher tenant turnover compared to other commercial real estate sectors, which was the case when studio leases were relatively short, has disappeared as the film industry is now turning to leases with terms of up to moves on to a decade and beyond. “This is definitely getting more common as both traditional and streaming platforms are looking for a place to settle down and ensure access to the sound stages for a growing number of films. The industry has moved away from a seasonal approach. “

As an example of recent institutional investor activity in movie studio real estate, Hackman Capital Partners and Square Mile Capital Management jointly acquired the Sony Pictures Animation campus in Culver City earlier this year, while working with Raleigh Studios to build the 10-acre campus of Raleigh in. to manage Hollywood.

The first major new studio building project in decades in Los Angeles also saw the groundbreaking this year Hudson Pacific Properties and Blackstone are planning to build it Sunset Glenoaks Studios, 240,000 square feet of studio space in Sun Valley.

The project represents a total investment of $ 170-190 million. The project is already fully eligible and is expected to ship in the third quarter of 2023.

According to a June report by CBRE, there is currently a 1.2 million square foot pipeline in place for new studio space development and existing studio space occupancy is over 95%. The consumption of content plays a big role. Eric Willett, regional director of research at CBRE, says ad minutes increased year over year in the US and worldwide. This is especially good news for Los Angeles, which Willett calls “Ground Zero” for studio space.