- Institutional investors are betting on production studios despite Hollywood strikes and a slowdown in content spending.
- Blackstone, Bain, and more are pouring billions into sound stages and related services.
- Investors said they believe demand for studio space will come roaring back once the strikes end.
Hollywood’s twin strikes may have largely shut down TV and film production, but they haven’t dampened investors’ interest in studio space.
Hudson Pacific Properties and Blackstone, along with Vornado Realty Trust, was poised to break ground in the third quarter on a $350 million studio campus on New York’s Pier 94.
And in July, East End Studios secured $193 million in construction financing for Sunnyside Campus, a 275,000-square-foot soundstage facility.
Institutional investment has been moving this way as the rise of streaming has created an explosion in demand for new programming — and for the spaces where it’s produced. Just as investors are pouring money into film and TV production companies, they’re also betting that the content boom is here to stay.
2023 has been a cautious year, with soundstages sitting empty amid the strikes, and the rising cost of construction has dragged out some projects, said Anthony Jasenski, who leads CBRE’s national film studio valuation practice. But a lot of new construction is moving forward, he added, driven by a shortage of soundstage supply before the strikes. “It’s a damper on the year, not the decade,” he told Insider.
The production real estate arena has for some time attracted giants like Blackstone, which in 2020 acquired 49% of real estate investment trust Hudson Pacific Properties’ three Los Angeles-based studios. In 2021 the two companies announced plans to invest up to $190 million to develop a huge studio on the edge of Los Angeles — Sunset Glenoaks Studios. And this year they plan to start construction on a big facility near London. They’re also actively looking to acquire existing studio properties.
Also bulking up in Hollywood is Bain Capital Real Estate, which in 2019 created a joint venture with Bardas Investment Group, a West Hollywood real estate development and investment firm. They’ve announced plans for more than $1 billion in studio developments in Hollywood and are on the hunt for more projects.
The leading markets — LA and New York — added 4.5% and 23% more square feet of sound stages, respectively, from 2020 to 2022, according to data tracked by CBRE.
Speaking to Insider in early 2023, before the strikes, investors insisted to Insider that their long-term view on the space hasn’t darkened, even if high interest rates and a slowdown in new content spending temper activity in the short term.
Global spending on content was expected to creep up just 2% this year, its slowest increase in a decade, according to Ampere Analysis — and that was before the strikes largely froze development and production.
Even if production volume continues to scale back or decelerate, investors argued, media companies’ drive for efficiency could mitigate that dip by favoring studio stages over costlier on-location shoots. They’re also counting on the fact that real estate and equipment represent a small share of a production’s budget, which bodes well for the sector should the industry hit a content slowdown.
Institutional investors historically have been cool on investing in studio spaces because they’re operating businesses that require hands-on involvement. Big studio lots have largely been in the hands of the media companies themselves. But new development and long-term studio leases that assure stable revenues have attracted new entrants.
And with media companies looking to free up capital to invest in content, it’s not hard to imagine the possibility of iconic campuses like Universal’s or Paramount’s being sold into the hands of financial players, or even an IPO of a studio platform at some point.
Insider identified 12 investors that are making big moves in the space, based on conversations with key stakeholders about current and upcoming deals as well as existing reporting about the past several years’ boom.
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