Soundstages Were Already Reeling Before This Summer of Strikes. Now What?  

‘I've got tenants … asking for rent relief like it was COVID again.’ 


Hollywood has lights and cameras, but no action. 

Writers aren’t writing and actors aren’t acting, by and large, so cameras aren’t recording and soundstages across the country are silent.

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The summer of strikes hit Hollywood and other entertainment hubs after union-affiliated writers and actors walked off their sets in protest against studio executives over contract disputes. It’s the first double strike the entertainment industry has seen in over 60 years, and much is at stake. According to Zion Market Research, the demand for global movies and entertainment in terms of revenue was valued at $94.5 billion in 2022, and it is expected to surpass $169 billion by 2030.

The last significant strike to hit the industry was in 2007. It only included writers, and tech companies such as Apple and Amazon didn’t have skin in the game like they do now via their expensive streaming arms. Even still, that strike lasted 100 days and was estimated to have cost Hollywood’s economy $2.1 billion.

The current strike could cost a lot more, depending on how long it lasts. This time it could mean at least a $4 billion loss globally, according to the Milken Institute, and that’s just the immediate impact. New contracts are expected to cost studios an additional $450 million and $600 million per year, as actors and writers seek higher wages and residual revenue sharing with streamers, as well as protections from artificial intelligence.

“It’s a challenging time,” said Sam Nicassio, president of Los Angeles Center Studios. “You come out of COVID and start to build it back up, and then the production industry comes to a halt. It’s challenging to run a business for sure.”

The halt in production comes amid a storm of other headwinds for those in the intense streaming wars. Challenges include declining profits, rising interest rates and inflation, regional bank failures, large amounts of dragging debt, and plummeting commercial real estate values. 

“Production in the U.S. has halted at a time when the sector is under pressure to mitigate the secular decline in linear TV and shows it can operate streaming platforms at a profit to mitigate linear decay,” Moody’s Analytics reported. “In a prolonged strike in which new theatrical Hollywood tentpole product is spread more thinly or runs dry, these companies could face earnings, cash flow and liquidity pressures.”

In the short term, the strikes obviously mean there are empty soundstages this summer. And that could give the studios trying to cut costs a chance to terminate deals and productions that now seem too expensive. But it remains to be seen what those empty soundstages mean for the long term. Even after new contract agreements are reached, questions will remain about if and how the shutdown will impact future negotiations on soundstage rents, loans and even development.

“This is creating a lot of stress in the market-place,” Gregory Barsamian, a senior vice president at CBRE (CBRE) based in L.A., said. “I know some of these guys are already going to their landlords and asking for some sort of rent relief arrangement.”

Investment in and development of studio and soundstage space skyrocketed after the start of the pandemic as streaming subscriptions boomed during COVID-19 lockdowns. But, after record-setting growth, the labor strikes may just be highlighting and even exacerbating a strained and saturated market, illuminating that investment has peaked — and maybe is stretched too far.

“Even if the [Writers Guild of America] and [Screen Actors Guild] strikes resolve themselves later this year, the entire entertainment/media landscape is very murky at best,” a market analyst familiar with the industry’s real estate activity told Commercial Observer. “Pretty much everyone with the exception of Sony jumped into the streaming wars, and now everyone has realized there was always going to be only one winner: Netflix (NFLX).”

Analyst firms are responding as well. Moody’s Analytics, which published a report this summer titled “Golden Age of TV Spending Causes Dark Age for Studio Profits,” downgraded soundstage owner and Netflix landlord Hudson Pacific Properties’ preferred stock rating and its senior unsecured debt rating amid the strikes because it does not expect the REIT can cover expenses, leasing costs and debt maturities. 

(Hudson Pacific declined to comment for this article. Another prolific L.A.-based studio landlord, Hackman Capital Partners, also declined to comment)

But, while some ratings suffer from the strikes, three brokerages last month raised their ratings on Netflix’s stock, Reuters reported

There’s also growing uncertainty over the spike influx in studio development projects that entered the pipeline the past three years — which would add several dozen more soundstages just in L.A. alone — and whether those projects will will come to fruition now. The days when Blackstone or other institutional investors entered Hollywood and dropped $1 billion on studio development could be over.

“I don’t know if you’re going to see the number of studio developments that have been announced actually get developed,” Nicassio said. “I’ve heard some are going forward, some are on pause, and some aren’t going to happen at all. And that may be normal in development cycles, but I think this has scared some people off, that maybe the studio business isn’t evergreen.”

Matt Moran, director at Project Management Advisors, which represents owners and real estate managers, including studio developers, said his firm has seen a slowdown in construction projects.

“Clients or owners are taking it as far as they can before they start building any kind of new real estate,” Moran said. “There’s been talk of developers slowing down on the development of studios, because, A, we’re coming to a saturation point; but, B, as the streaming services buy each other out, they [add more] content and have less of a rush to produce.”

The entertainment industry and studio real estate were already on shaky footing before the strikes. Last fall, Savills reported that “a reckoning” hit the entertainment industry as it faced rising costs and slower subscription rates that spooked investors. 

“For the first time in a decade, Hollywood has now entered a period of relative austerity due to slowing growth and recent industry consolidation,” Savills’ 2022 report read. “Developers have proposed millions of square feet of studio and soundstage projects just as content spending could be plateauing. … If all proposed studio and soundstage projects are realized, the L.A. market could see a supply glut over the next four to five years.”

Citing data from the period leading up to when the actors joined the writers on the picket lines, nonprofit FilmLA reported that on-location productions in the L.A. region declined in the second quarter by 29 percent compared to a year ago, for the sixth straight quarterly production drop.

“Greater Los Angeles is the North American epicenter of scripted television production. Before long, this sector’s shutdown will be felt in every corner of the regional economy,” FilmLA President Paul Audley said. (During the strikes, all FilmLA employees’ hours are reduced by 20 percent, and all staff have now been designated as “hourly” employees.)

Many also believe the Hollywood labor strikes will lead to more consolidation, internally and externally, and force reductions in size for the entertainment industry.

“Studios were already looking to densify and consolidate all of their space types, including office,” Moran said. 

Sources told Commercial Observer that Showtime terminated its headquarters office lease at The Lot in West Hollywood, showing that parent company Paramount is looking at efficiencies. Also, Warner Bros. is subleasing space and consolidating some units, such as CNN and Cartoon Network. Additionally, CoStar reported that independent production company Vista Studios is set for auction after filing for Chapter 7 bankruptcy, which means putting more space on the market.

Moreover, the strikes could ironically push consumers further into streaming services, which have large catalogs of content to turn to when other outlets run dry. Some streaming services’ banks of unreleased programs can help them survive in the near term while other networks will have nothing new to offer. Bigger companies like Netflix, Disney, Warner Bros. and Amazon also have produced content in foreign markets that aren’t covered by Hollywood unions, and also have larger reserves of content that will help buy them time and weather the strike.

On the other end of the production spectrum, movie theaters face their own judgment day, and soon they could have significantly fewer titles to debut because of the strikes. And theaters were already retracting: In 2022, there were only 71 movies that opened to wide release compared to 112 in 2019.

All the behind-the-scenes ancillary services are struggling mightily as well. These are the industries that rely on show business: hair, makeup, wardrobe, agents, accountants, prop warehouses and set designers — and commercial real estate firms.

“It’s not only affecting the people you see in the news, but independent operators like us and everybody else that services the production industry,” Nicassio said. “I’ve got tenants that are not production but are production-related here asking for rent relief like it was COVID again. It’s affecting publicists, the agents, it’s everything that feeds off the system.”

If the strikes carry on much longer, Barsamian said he could see some smaller shops in the support industry shutting down.

The total fallout might not hit consumers or exert a larger effect until this fall when there’s no new television programming, and then in 2024 when fewer and fewer new movies show up in theaters. The industry will wait to see who survives until then.

“It will get settled. The production business that we rely on more than the office here will come back,” Nicassio said. “Healthy landlords like us will fare much better.

“Having done this for 20 years and watching the cycles — and this is the most brutal cycle I’ve seen — I firmly believe when production comes back, it will come back as strong as it was. There’s still demand.”

Greg Cornfield can be reached at