It was a bizarre year to say the least for Los Angeles commercial real estate.
It was all fun and games for anyone in the studio industry, which saw record demand from both tenants and investors, while the e-commerce sector propelled record demand for manufacturing and distribution warehouse space. But for office and retail, it was a roller-coaster year. California was still largely closed for business at the start of the year from the initial pandemic shutdowns, and then the delta and omicron variants further disrupted a mass return to the office.
Now, as the year comes to a close, we can reflect on the most important deals and trends that got us to the finish line.
No business like show business
The renowned streaming wars have Hollywood booming. Netflix, Apple, Amazon and Disney are all growing their footprints to expand their catalogs, and landlords and investors are taking advantage.
The joint venture of Hackman Capital and Square Mile led the way in 2021 by a long shot. The joint venture started the year by acquiring Raleigh Studios in Hollywood and Sony Pictures Animation campus in Culver City, and then announced a $1.3 billion redevelopment at the historic Television City studios. Then, in the biggest deal of the year for L.A., the joint venture bought CBS Studio Center from ViacomCBS for approximately $1.85 billion. Not too shabby for one year’s work.
Other institutional production companies are also capitalizing on the surging demand. Warner Bros. announced this year that it’s selling the historic Ranch Studio, and will lease the property back after a massive $500 million expansion by new owners Worthe Real Estate Group and Stockbridge. Brookfield also acquired the headquarters for DreamWorks Animation from Hana Asset Management and Ocean West Capital Partners this year.
And there was also a string of newcomers on the studio scene in 2021. Bain Capital Real Estate and BARDAS Investment Group filed plans with the city to build a $450 million soundstage project in Hollywood, and Atlas Capital Group filed plans with the city to redevelop a downtown property into a $650 million “Hollywood-style” studio lot with 17 soundstages and 212,300 square feet of offices.
Have you ever heard so much talk about “supply chain issues” before the past 12 months?
The ports of L.A. and Long Beach set new wire-to-wire records for imports this year, and Southern California’s industrial market continued to grow at a record clip. Just three quarters of the way through the year, the U.S. closed $36.6 billion in industrial real estate sales, and according to CommercialEdge, three counties in Southern California combined for more than 15 percent of that total volume.
Despite millions of square feet coming to the market this year, production hasn’t kept pace with demand, and the industrial vacancy rate in Southern California’s Inland Empire fell below 1 percent. Thus, landlords like Rexford Industrial Realty acquired more than $1.6 billion in real estate this year, while big e-commerce tenants like Amazon continue to expand their footprints with major leases.
Perhaps the best example came in October when an Amazon warehouse sold just one year after it was converted from an office space for 800 percent more than its previous sales price in 2020.
A workplace, if you can keep it
It was a tense year for workplace real estate as a mass return to the office never materialized. Thankfully, L.A. is uniquely positioned to break up major lulls in the leasing market due to thriving tech, entertainment and creative industries.
The first big lease of the year came when plant-based food company Beyond Meat signed a 12-year deal to move its headquarters to Hackman Capital Partners’ prized office redevelopment in El Segundo.
In the spring and summer, more big names flexed their muscles. Snap Inc. expanded its headquarters lease at a 1.2 million-square-foot creative campus in Santa Monica. Hulu expanded its office space to 351,000 square feet with a new seven-year lease at the 15-acre Colorado Center, which is the same campus where Roku signed for 72,000 square feet. And Creative Artists Agency — one of the preeminent representation firms for actors, athletes, and musicians — also renewed its lease in Century City for close to 300,000 square feet.
And, for better or worse, more is on the way. Early in the year, the L.A. City Council approved Onni Group’s Times Mirror Square project across from City Hall downtown, which will add 307,300 square feet of office space to an already robust pipeline.
Gregory Cornfield can be reached at firstname.lastname@example.org.