There’s no room in Hollywood. Unprecedented low vacancy rates in the single digits equals a competitive race from soundstages to Class A creative office space from the Valley to the Pacific.
“The occupancy around town is at 97%, an all-time record,” says Jones Lang LaSalle’s Carl Muhlstein, an international director with the real estate and investment management services company.
Variety surveys the top players in driving Hollywood’s commercial real estate boom.
A significant amount of Caruso’s business comes from those in the entertainment industry, says CEO Rick Caruso, whose firm is behind the Grove, the Americana in Glendale, Palisades Village and the newly opened, upscale, 161-room Rosewood Miramar Beach resort in Montecito.
The developer and philanthropist — he’s chairman of USC’s board of trustees — is recognized for redefining and expanding the concept of shopping malls and transforming them into captivating entertainment destinations. His company has 12 major retail and commercial residential developments completed, and a 13th, 333 La Cienega, a mixed-use residential tower, will begin construction in 2020.
His organization strives to cater the industry. “I know — in a very positive way — there’s a much higher level of expectation and there’s a great appreciation for design,” says Caruso. To appeal to this demanding clientele, “We make sure every detail is drilled down and the level of service is to a point that exceeds expectations.”
The company’s fingerprints are all over some of the year’s biggest deals, including HBO’s move from its longtime corporate offices in Santa Monica to a shiny new HQ in once-sleepy Culver City, now a burgeoning entertainment and tech center. HBO will occupy all 240,000 square-feet of office space of the Ivy Station mixed-use development, a $350 million project that will include apartments, restaurants and shops; it is scheduled for 2021.
CBRE’s Jeff Pion, above, and Matthew Hargrove repped both the premium cable network and Ivy Station. Todd Doney and Blake Mirkin from CBRE represented Hudson Pacific Properties in another monster deal in which Google will rent almost the entire former Westside Pavilion mall being redeveloped by Hudson Pacific Properties in partnership with Macerich.
“L.A. is in a renaissance because of all the giant content creation media companies here,” Pion says. “And so many of them are looking here as they can find top talent along with a unique cultural fabric.”
L.A. is a red-hot market for the giant Canada-based global commercial real estate services organization. Executive VP Nico Vilgiate recently represented Microsoft in its 22,000-sq.-ft. tech lease in Playa Vista at 13031 W. Jefferson Blvd.; Eikon Group in relocating and expanding its post-production services in Burbank at approximately 30,000 square-feet at 2777 N. Ontario St.; and Titmouse Animation’s expansion into North Hollywood with 25,000 square-feet along Lankershim Boulevard.
“The marriage between the entertainment and the technology industries is no longer in the honeymoon period in Los Angeles,” Vilgiate says. “Greater L.A. is the tip of the spear when it comes to these two industries and their explosion for content creation and its positive impact on employment. As such, robust office leasing over the last several years has been the catalyst for significant appreciation in rental rates and commercial real estate values throughout the region.”
Kilroy Realty Corp.
Hollywood’s remade Columbia Square and under-construction ON Vine, a 3.5 acre mixed-use development including 335,000 square-feet of office space and more leased to Netflix, are two of Kilroy Realty’s neighborhood-changing developments. The firm invested in the adaptive reuse and expansion of the mixed use Columbia Square on spec, intent on building an environment that embraced Hollywood’s creative legacy. “Smart people, technology and entertainment all wanted to work and live in Hollywood, but there was nothing that met the expectations and needs of those people,” explains Brian Lewis, Kilroy Realty Corp. senior VP, retail development and curation. Columbia Square features 200 apartments, the Gower-Selma office building — now home to Viacom — reuse of the historic CBS Studios, restaurants and retail.
Hudson Pacific, which owns and operates 17 million square-feet of properties in the West Coast epicenters of media and technology had another huge year. Netflix is leasing all 327,913 square-feet of Epic, its 13-story office development on Sunset, and will occupy the building in phases beginning in January. Netflix also signed a coterminous lease extension for 325,757 square feet of office space at Icon and 91,953 square-feet at Cue, both located on the Sunset Bronson lot, which is also home to long-term tenants CBS and KTLA.
“We’re thrilled Netflix has selected Epic to accommodate its next phase of growth,” said CEO Victor Coleman in a statement. “Netflix is part of an elite class of high-growth, high-innovation companies leading the revolution in content production and distribution that is reshaping the L.A. studio and office markets.” With Macerich, it leased the entirety of the One Westside redevelopment, a planned 584,000-sq.-ft. Class A creative office campus, to Google. Google’s approximately 14-year lease term will commence upon completion of construction and build-out of tenant improvements in 2022.
There’s an ongoing soundstage and office space race in Hollywood, but it wasn’t always so, and the Jones Lang LaSalle Brokerage (JLL) team of Carl Muhlstein, Hayley Blockley and Nicole Mihalka have been involved in the area for the past 15 years. Since 2014, they’ve closed 305 entertainment-related transactions, totaling 5,470,000 square-feet. The district’s increased appeal to major entertainment companies is due to several factors, they say.
Viacom and Netflix’s entries into long-term leases helped launch the present demand for Hollywood office space and created a ripple effect across the sector, with related entertainment and tech companies requiring space nearby. Red Line Metro access, construction of Hollywood & Highland and the W Hollywood hotel had additionally spurred revitalization over the past decade. Today’s tenant is of a different caliber.
“The average size of tenant leasing has increased, as larger tenants have moved into the Hollywood market,” says Blockley. And their asks have changed, too. “Entertainment companies like accessible, low-rise campuses with six stories or lower with a lot or outdoor space and amenities,” Mihalka says.
Entertainment team leaders Steve Kolsky and Greg Frankovich rep Live Nation, HBO, Starz, Legendary Pictures, Funny or Die, and transactions total over 50 million square-feet that represents $7.2 billion. The firm relocated eight of Interpublic Group’s agencies to Century City in a $70 million-plus deal. It is also finalizing transactions for a confidential entertainment client for a $300 million-plus, 400,000-sq.-ft. deal.
“Los Angeles is ground zero in the marriage of content and technology,” says Frankovich. “This has led to the expansion of entertainment firms and also inspired them to be more thoughtful in choosing locations and creating work environments to attract and retain L.A.’s highly sought-after workforce,” adds Kolsky.
The tech team of Ryan Harding and Jennifer Frisk closed $200 million-plus of contracts over the past year, and reps Weedmaps, Grindr, the Xprize Foundation and 100Thieves. The duo doubled their business in 2019 with an increasing influence in the tech, cannabis and esports industries. “We’ve learned to take advantage of the disruptive technologies,” they note in a statement.
In 2018, the team of vice chairman and director Mark Sullivan, vice chairman and Los Angeles office lead Josh Gorin, as well as senior managing director Andy Lustgarten completed 95 deals totaling nearly 8 million square-feet, valued at more than $2.5 billion. Prominent tenants included Comcast, Canyon Partners, Red Bull, Roc Nation, Malibu Bay Co., Sundance Institute and Apple. It negotiated more than 4 million square-feet of transactions for Technicolor, including 3.5 million square-feet in Memphis, 200,000 square-feet in Rugby, England, and significant transactions in China, Australia and India, as well as a long-term lease renewal for Technicolor’s 115,000-sq.-ft. Hollywood headquarters. They executed an expansion and early lease restructure for an 80,000- sq.-ft., $50 million transaction at Howard Hughes Center in West Los Angeles for All3Media.
Sullivan says such hot markets as “Hollywood, Santa Monica, Burbank and Culver City are being dominated by very large companies like Netflix, Disney and Apple, who are now focused on growing their content creation business.”
It was another busy year for the leading global real-estate services firm, with revenue of $8.2 billion. In L.A., Suzanne Lee oversaw the deal relocating ServiceTitan’s HQ to a new 123,123-sq.-ft. office at 800 N. Brand Blvd., Glendale. Andrew Tashjian oversaw the NHN Global/Pettebone Building deal downtown, in which the South Korean video-game developer bought the historic building for a reported $22 million. In New York, recent deals include Warner Media’s 1,418,000 sq.-ft. lease at 30 Hudson Yards; Google’s 1.3 million-sq.-ft. new lease at 550 Washington St.; another new Google lease for 260,579 square-feet at 315 Hudson St.; Twitter’s 214,666-sq.-foot deal at 245-249 West 17th St.; and Netflix’s new 100,000-sq.-ft. lease at 888 Broadway.
“Venture capital funding continues to pour into NYC, as there is strong confidence in the area; tech companies are growing at such a fast rate that it is necessary for them to expand,” reports Cushman & Wakefield Tri-State Region Research.