So Long, Long-Term Leases. Short Studio Stints Are Here To Stay
A rash of longer-term studio leases signed in the years before the pandemic was likely a flash in the pan, with more traditional short-term leases proving to be the more useful format for users.
Shorter-term deals that lock down space on a show-by-show basis — how soundstage leases have been structured for decades — will continue to make up the majority of leases, soundstage experts said Tuesday at Bisnow’s Los Angeles Studio Real Estate Conference at The Pointe in Burbank.
That is because of industry recalibrations and the specific needs of individual productions, which have taken on a renewed focus compared to the frenzied days of the streaming wars, when content producers vied for space to keep up with consumers' demand for expensive new shows.
Traditionally, studio lease length tends to be measured by how long it takes to film a show or movie, rather than a set number of years like other commercial leases. But as streaming services ramped up content production and competed with major studios, the companies in some cases signed years-long leases to guarantee they would always have a place to film.
“There was a trend towards master leases, but I think we're going to see a lot of these groups — especially coming out of the strike, when they're trying to figure out where the budgets are in production — probably trend back towards that shorter-term, more seasonal [lease] for a while at least,” JLL Managing Director Nicole Mihalka said on a panel at the event.
Once they get back to filming, that is. A strike that has kept writers and actors away from sets appears to be nowhere near resolution.
The impacts of the ongoing strikes of actors and writers unions came up frequently throughout the event, which was held two blocks away from Walt Disney Studios, where union members were actively picketing.
Whenever the strike does end, the panelists anticipate a flood of production similar to what took place after pandemic lockdowns were eased enough to allow filming to resume.
Longer-term leases are also referred to as master leases, but that can be a misnomer, as they don't always involve leasing of an entire lot to one user. Additionally, the leases sometimes include provisions for the studio owner or operator to sublease unused space to other tenants. Mihalka said maybe only 10 have been done in LA in the past few years compared to thousands of shorter-term leases.
Road Town Enterprises principal Nick Smerigan, who designs, builds and operates independent studios, said as an operator, he prefers short-term leases.
As he sees it, shorter leases also allow productions the flexibility they need to meet the demands of the talent on the production.
"As they have previously done, major players will continue to secure longer-term interest in the core areas of the [30-mile zone],” Mihalka told Bisnow after the event, referring to the 30-mile radius around Hollywood where prime soundstage space has traditionally been located.
But outside of those core areas like Hollywood, Culver City and Burbank, she also said she anticipates seeing short-term leases remain the norm, especially near the edges of the radius.
The entire soundstage industry hasn't always been a major recipient of institutional capital or much attention from the commercial real estate community. The industry was thrust into the limelight by the 2020 deal between Hudson Pacific Properties and Blackstone that saw the latter taking a $1.65B stake in the former’s studio properties, Mihalka said.
“Everybody thought, ‘Wow, a shiny new object, a light in this Covid darkness,’” Mihalka said. “Everybody wanted to build a soundstage facility. All of a sudden, our phones were ringing off the hook.”
