Since the bottom of the recession in 2009, we estimate that market rents have grown at a 5% growth rate. However, if you measure from the previous peak in 2008, rent growth as of December 2017 is only 2.25%. I assert that the peak to peak measure is a more accurate reflection of long term rent growth. Based on a 38 year internal rent study, Los Angeles apartment rents have grown over 4%. However, that time period includes many high inflation years that distorts the number upwards.
Streaming services are spending billions of dollars on new content that is flowing into the Los Angeles economy and creating more jobs and in turn more demand for office space and apartments. Netflix, You Tube, Amazon, and Apple have all expanded their footprint in Los Angeles. Other forms of streaming media and internet web new and entertainment sites also expand within the LA community. Here is one article from the Los Angeles Times.
Peak TV brings production jobs back to Los Angeles, with a boost from streaming series
By David Ng
Jan 12, 2018 | 7:00 AM
Peak TV brings production jobs back to Los Angeles, with a boost from streaming series
A production crew prepares to film the second season finale of the Amazon Studios series “Goliath” at the Millennium Biltmore Hotel in downtown Los Angeles in December. (Luis Sinco / Los Angeles Times)
It was already late in the day and nearly 250 extras were still waiting patiently on set as the crew for the Amazon Studios series “Goliath” put the finishing touches on a scene with actor Billy Bob Thornton being shot at the Millennium Biltmore Hotel in downtown Los Angeles.
The climactic scene from the show’s upcoming second season — which is scheduled to launch this summer — featured an enthusiastic political rally to crown L.A.’s new mayor. Production assistants arranged the extras into a tight formation and then adjusted campaign signs and balloons before three camera crews captured several takes of Thornton pushing his way through the frenetic crowd to confront the mayor-elect in a dramatic showdown.
The hours of preparation involving more than 100 crew members will result in just a few minutes of screen time. In the production industry, long, tedious days are a given. But local crews aren’t complaining as the phenomenon known as “peak TV” continues to bring back jobs to an industry that only a few years ago was reeling from the flight of production to other states and countries.
The surge in content from streaming services such as Amazon, Netflix and Hulu, as well as the major networks and premium cable channels, has had a trickle-down effect through the L.A. production industry. Expanded state film tax credits also are giving producers more incentives to shoot closer to Hollywood, industry experts say.
“I started in 1977, and I’ve never seen it as busy as it is today,” said Steve Dayan, who heads the Hollywood Teamsters Local 399, which represents about 4,500 studio drivers, location managers, casting directors and other crafts. He said employment levels for the union’s members are near peak levels. “We have been at near or full capacity in 2017, and we’re expecting 2018 to be the same.”
It’s a marked economic reversal from just a few years ago when Hollywood was contending with “runaway productions” fleeing to states such as Georgia, Louisiana and Maryland, where it is often cheaper to shoot.
“Five years ago, I was out of work,” recalled Keegan Zall, who runs craft services for TV and film productions. “A lot of people were out of work. You’re in Hollywood, and nothing was being made.”
But in the last few years, he has found steady work on shows such as NBC’s “This Is Us,” CBS’s “Scorpion” and Amazon’s “Goliath.” “Now it’s way better,” he said during a break in the “Goliath” shoot.
Shows typically employ hundreds of individuals directly and many more indirectly through vendors who provide everything from the visual effects that enhance a shot to the prop houses that supply the physical furniture and decorations for sets.
Local businesses say that the economic ripple effect is being driven mainly by streaming shows.
“Businesses like mine aren’t solely dependent on the work by the traditional studios,” said Fred Arens, president and chief executive of Objects, a Sun Valley company that provides fine furniture, accessories and textiles for film, television and commercial productions. “The trend has accelerated not only the quantity but also the quality of programming and has given my business a lifeline.”
Billy Bob Thornton in the upcoming season two finale of “Goliath,” the drama series from Amazon Studios.
Billy Bob Thornton in the upcoming season two finale of “Goliath,” the drama series from Amazon Studios. (Merie Wallace / Amazon Studios)
The surge in TV production has had a measurable impact throughout the L.A. area. The average occupancy rate for certified soundstages was 96% in 2016, according to a recent study by FilmLA, the nonprofit group that oversees film permits in the city and county. Nearly 90% of soundstage shoots for that year were TV-related — including half-hour and hour-long series as well as talk shows.
On-location filming — which represents filming outside certified soundstages — rose 6.2% between 2015 and 2016. FilmLA hasn’t announced full results for 2017. But overall production activity in L.A. is expected to be down slightly from 2016’s record highs with strong scripted TV production keeping the industry trending close to record levels, according to a person with knowledge of the data.
The TV production boom is being driven in large part by the abundance of content that studios are pumping out in an effort to satisfy consumers’ changing viewing habits, which have shifted toward binge-watching and viewing on multiple digital platforms. The breakneck production pace is now year-round as cable channels and streaming services look to keep their subscribers hooked with a steady flow of new shows and seasons.
Hollywood produced 487 scripted shows in 2017, up 7% from the previous year, according to FX President John Landgraf, who keeps an annual count. Streaming services alone produced 117 shows for the year, up 70% from 2010 when streaming TV was still in its early days.
Many prominent streaming shows are being shot in L.A. In addition to “Goliath,” Amazon Studios produces “Bosch” and “Transparent” in Southern California. In a sign of its commitment to local production, the studio recently signed a lease for the Culver Studios, the historic lot in Culver City, where it will take over soundstages and other production space.
Netflix also films shows in L.A., including “Grace and Frankie,” “Love,” “The Ranch” and the recent Will Smith movie “Bright,” which is rumored to have cost $90 million. The streaming giant signed a 10-year lease at Sunset Bronson Studios in 2016 for the Hollywood property, which also includes an adjacent office building that serves as the company’s L.A. headquarters.
A traditional one-hour network series costs around $4 million per episode, but shows on cable and streaming services can cost much more as they aim for a cinematic look using real locations. HBO’s “Westworld,” which mixes science fiction and the Wild West, is said to cost as much as $10 million per episode. The series shoots throughout Southern California, including wilderness areas in the Santa Clarita Valley.
“Years ago, audiences would expect more stage work. Today, it has to look like a movie,” said Dennie Gordon, a veteran TV director who has worked on “Goliath” and numerous other series. She said “Goliath” typically features just one day of soundstage shooting per episode, which can take up to 10 days to film.
(Source: FilmL.A. Inc.)
California’s tax credits for TV and film, which were boosted in 2015, have also played a significant role in reviving local filming. The five-year, $1.55-billion program, which provides 20%-25% state tax credits to productions, has succeeded in luring TV series from other locations, including FX’s “Legion,” Fox’s “Lucifer” and Showtime’s “The Affair.”
Netflix projects that have benefited from state tax credits include “Bright” and the upcoming post-apocalyptic drama “Bird Box,” starring Sandra Bullock.
Big-budget blockbuster movies still shoot mostly outside California. But the tax program was instrumental in getting Disney’s “Captain Marvel” and Paramount’s “Transformers” spinoff “Bumblebee” to shoot in-state.
Some industry leaders are concerned that the conclusion of the program in 2020 could send TV production back to states that offer better incentives. Local 399 is planning to actively lobby state leaders in the coming months to extend the program.
“We need more robust incentives to stay competitive,” said Lawrence Trilling, an executive producer on “Goliath.”
L.A.’s biggest advantage remains its deep pool of technical talent that is versed in all aspects of TV filming. The skill sets of L.A. crews are unrivaled in the industry, said Srdjan Stakic, a co-producer and line producer on the Pop series “Swedish Dicks.” The comedy series, starring Peter Stormare as a bumbling private detective, shoots around downtown and East L.A. and employs about 100 crew members per season.
“The quality of the crews are the best in the world,” Stakic said. “There are good crews elsewhere as well. But it doesn’t compare to L.A.”
PMI Properties is pleased to announce the sale of a boutique office building located at 401 Washington Street in San Francisco. The seven story building is located in San Francisco’s North Financial District, one of the most desirable and iconic neighborhoods and just a mere block away from the landmark Transamerica building. The buyer was Century | Urban, a real estate investment and advisory firm located in San Francisco.
The North Financial District offers many amenities such as upscale restaurants, bars, cafes, nightlife and is centrally located to the Embarcadero Center and the historic Ferry Building all while being the hub of business in San Francisco.
The building is currently fully occupied and leased by a variety of companies. “The combination of strong in-place income, prominent identity, and a quality, well-maintained building, adjacent to transit, in one of the most desirable sub-markets in San Francisco, makes the acquisition a highly attractive investment opportunity” said Bryant Sparkman, Principal at Century | Urban. The building has maintained over 90% occupancy – even through the 2000 dot com bust and 2009 financial crisis.
PMI Properties bought the building in 2007 and after a 10 year holding period, sold the building to Century | Urban in 2017. Unlike PMI’s typical value add creative renovations, 401 Washington was a core property requiring little renovation , yet it achieved close to a doubling of value over the holding period. PMI entered the San Francisco market in 2005 after the end of the dot com bust and purchased five creative office buildings in addition to 401 Washington. PMI has so far sold four of its six San Francisco assets. PMI was represented by Dan Cressman and Kyle Kovac of Newmark, Knight, Frank.
Class A office values rose significantly again in 2017. Firms like Douglas Emmet paid over the $1000 per square foot price for prime class A office buildings. Cap Rates are now below 5% for most office classes on the Westside. Recently, Artisan Realty Advisors paid over $1000 psf. for 520 Broadway in Santa Monica. This price is significantly greater than the 1984 value of $182 psf. and the 1993 recession low of $71 psf paid by Kennedy Wilson. Several buyers have significantly upgraded this 1982 Herb Nadel designed office building over the years.
Marcus & Millichap predicts in their 4th Quarter Apartment Report for Los Angeles that 18,000 units will be completed in the next 12 months, while 2017 completions will be closer to 12,000 units. Although more units have been completed in the last 36 months than in any other 3 year period since the 1980s–apartment completion are still significantly below the 1980s. An 18,000 unit year is a horse of a different color. This increase would begin to rival the 1980s when supply did exceed demand. In any case. M & M forecasts vacancies rising from 3.6% to 4.1% in 2017. Despite the muted supply–Marcus and Millichap sees absorption in 2017 slowing from previous years. Perhaps, rents, which continue to increase, are now outstripping incomes–even at the higher income levels. Over half of the deliveries are in downtown Los Angeles. M & M forecasts downtown vacancies increasing from under 4% to 5.4% at the end of the year. Developers are offering incentives to rent their units. Although this absorption problem will put pressure on effective rents and make Downtown landlords more vulnerable to a recession–the new apartments will continue to cement Downtown as the upcoming new Los Angeles burb for upper income residents.
PMI is proud to announce that the Dumont Project, an advertising and marketing firm, recently amended their lease to take over suites A130 and A100 at our commercial property located at 4223 Glencoe Ave. in Marina Del Rey. The firm now occupies 5,810 sq ft of office space, the largest allocation of space for one tenant in the building.
The Dumont Project is a consultancy that specializes in growing brands by providing services in analytics, creative development, digital marketing, and media management. They work with a wide range of clients, including Vineyard Vines and M&M.
With the expansion of gentrified areas south of Silverlake and Echo Park, Creative Multifamily has remodeled and leased up an apartment building at 306 Bonnie Brae street, one block south of Temple Street. This new property is located within walking distance of Echo Park Lake and shops and restaurants along Sunset Boulevard.
306 Bonnie Brae consists of 9 2-bedroom, 1-bathroom units that have been completely refinished and equipped with modern amenities, brand-new stainless appliances, and in-unit washer and dryer. Each unit has an efficiently designed layout, hardwood floors throughout, and lots of natural light. The property is privately enclosed with bamboo and a beautiful new redwood fence.
Many other developers have also moved South; there are five new large scale apartment projects being developed along Temple Street, with two bedroom rents starting at $2,700 per unit.