Exploding consumer streaming demand driving production industry’s need for more space
Global commercial property consultant CBRE is reporting the public’s growing appetite for streaming video content – accelerated of late by COVID-19 restrictions on social gathering – has ignited demand for sound-stage real estate in several North American markets.
Sound stages, often called production space, still are a niche market, totaling roughly 11 million sq. ft. across six leading entertainment-production markets: Los Angeles, Atlanta, New York City, British Columbia (primarily Vancouver), Ontario (primarily Toronto) and Louisiana (primarily New Orleans). Occupancy rates in major markets hover above 90 percent, and an influx of institutional capital into the sector has encouraged standardization of formats and operations.
The Greater Los Angeles area accounts for roughly half of North American production space with no signs of losing momentum. However, other entertainment-production markets such as Atlanta, Vancouver and New Orleans also are expanding due to lower costs for labor and real estate and economic incentives earmarked for the industry.
“Production space now is coming into its own in North America as an asset class recognized and pursued by institutional investors,” said Jeff Pion, a CBRE Vice Chairman in Los Angeles who has advised on numerous production-space transactions. “The recipe is enticing: Growing demand for content, limited availability of sound stages and rising rents for that space. That is drawing in more institutional capital.”
CBRE reports that capitalization rates for sound stages are edging closer to those of other, more liquid asset classes. Among the institutional investors long active in production space are Hudson Pacific Properties and Hackman Capital.
“Demand for production space is so strong in leading markets that we’ve seen warehouses and other suitable properties converted to sound stages,” said David Todd, CBRE First Vice President in Atlanta. “Many features needed for a sound stage – high ceilings and large unobstructed floor plates – are common to warehouses. Sound proofing and suspended weight loads then can be added. In the Atlanta area, developers and studios now are building from the ground-up specifically for production on sites that were once parks, fairgrounds, a military base and an auto-assembly plant.”