Sunday Summary: Hollywood Ending?

Los Angeles has a lot of real estate problems. There’s too little housing. The housing that’s there is too expensive. There’s too much political rancor to solve the problem. And this comes on top of the fact that the city was hit with tens of billions of dollars in damage from the wildfires earlier this year.

Plus, that’s just housing. We can spend a lot of time talking about L.A.’s ghastly office scene if you’re free for the next few hours.

But one thing that always seemed stable was Hollywood. The City of Angels would always and forever be the entertainment capital of the known universe. This was where any office boy or young mechanic could be a panic with just a good-looking pan. (We know we heard that somewhere…)

Movies and television would need space to shoot. Millions and millions of square feet of space. Executives would need offices and Wolfgang Puck restaurants to hold meetings. And the talented people producing moving images would need somewhere to sleep. The masters of this art form always came together under the California sun, and that was good for real estate. We’d always have Burbank.

However, the one thing that 2025 is conditioning us all to do is question every last underlying assumption.

Last week the Otis College Report on the Creative Economy showed that the number of shooting days in L.A. County was down 42 percent in 2024 from its peak two years earlier.

You read that correctly. Down 42 percent.

Likewise, production levels are between 50 and 70 percent lower than they were six years ago.

“The majority of tentpole film productions do not shoot in Los Angeles,” declared Jason Hariton of studio operator MBS Group.

“California is not the first, second, third, fourth or fifth choice for filming at the moment,” Sam Nicassio, president of Los Angeles Center Studios, told Commercial Observer.

There are a lot of reasons for this. The Hollywood strikes that scrambled a lot of scheduling and planning come to mind, but a number of cities around the country have also been wooing production companies to decamp.

“There are 85 jurisdictions in the world right now that have film and TV tax credit incentives, and that number grows,” said Nicassio.

However, one thing we have to say about Angelenos — they have a sunny disposition. And when you send the universe good vibes, the universe sometimes returns the gesture.

Despite all we just said, there are still developers who are hustling to make L.A. work. For example, just last week Jamison Properties persuaded Beach Point Capital Management to loan them $60 million to convert the former Pierce National Life Building property at 3807 Wilshire Boulevard into housing.

Likewise, Ashkenazy Acquisition Corporation just leased 20,000 square feet at Beverly Connection, the Fairfax mall that has been mired in CMBS special servicing, to Bloomingdale’s Outlet.

Plus, we’ve seen this picture before — and with a happy ending. Seemingly doomed California markets like the San Francisco Bay Area often figure out how to claw their way back. Last week, MidPen Housing landed $162.9 million in construction financing for the second phase of the affordable housing complex Midway Village in Daly, Calif.

You think L.A. has problems!

Maybe that Otis report put us in an overly dour mood, but we’ve also been gnawing our fingernails over a number of other issues — like the CMBS distress rate doubling in the last two years (as well as the general lack of appetite for office in CMBS), foreclosures (or near foreclosures), and prices being reset all the way back to 1990s levels. But the thing that has us most worried is regional banks.

March was the two-year anniversary of what could have been the biggest banking breakdown since the Global Financial Crisis when Silicon Valley Bank, Signature Bank and First Republic Bank which collectively held some $532 billion in deposits, all saw a run on their cash over eight weeks.

As that crisis unfolded, banks like Signature had a lot of assets on their books that were worth considerably less than the money owed on them.

Thankfully, the FDIC and the Federal Reserve stepped in to make depositors whole and the assets were sold off, but this could have metastasized into something truly ugly. Ever since the crisis, a lot of experts have wondered about the current crop of regional banks. Do they have the same level of toxic waste on their books?

Some say yes.

“The banks can’t hide anymore from this,” said Chad Carpenter, CEO of Reven Capital. “They’ll all have to face the music. All those regional banks with overexposure in office, they’re going to be in big trouble.”

Others are more sanguine.

“The state of banking is strong at both the regional level and the broader U.S. level,” said Matthew Bisanz, a financial services and bank regulatory attorney at Mayer Brown. “The banks are well situated for many different events that can occur.”

No one can say exactly which way this will bounce, but we’ll take the sunny view for now.

Bright lights, big city

One person who is definitely embracing the sunny view of CRE writ large is Gary Barnett.

Regular readers of Sunday Summary will remember that last week we were singing the Extell chief’s praises for the $450 million deal he’s currently negotiating with Chanel, and just after that column went to bed Barnett surprised everyone yet again.

He plunked down a “stupid” $175 million to South Korean clothing manufacturer Sae-A Trading Company for 576 Fifth Avenue so that he can develop a full block of New York City between West 46th and 47th streets when combined with the properties he already owns.

Barnett was not the only developer with his eye on Fifth Avenue and a few hundred mil burning a hole in his pocket.

Naftali Group is laying out the ungodly sum of $800 million for 800 Fifth Avenue to Spitzer Enterprises (Eliot Spitzer’s real estate firm) and Winter Properties.

And the Newark-based KS Group is laying the ground to finally restart development at the $1.2 billion, 1,700-unit Astoria Cove in Queens.

That’s all very big money, but the figures that really raised our eyebrows were related to what we saw happening in data centers last week.

A new Colliers report said that deal volume last year came in at a stunning $57 billion, with another $29 billion in deals pending.

And Related Companies is not one to be left out of the action. The company said it was planning to raise $8 billion for its new Related Digital platform and had a $45 billion project development pipeline.

Corner office material

We heard about a couple of interesting promotions last week.

Down in South Florida, Jon Paul “JP” Pérez claimed the top spot as CEO of Related Group, the largest developer of condos in Miami.

In New York City, veteran broker Mitti Liebersohn landed the job of CEO of brokerage operations for Savills’s tri-state region.

Congratulations, gentlemen.

Farewell to the king

Finally, we would be remiss if we did not mark the passing of one of the true legends of architecture and design.

David Childs, the architect behind 1 World Trade Center, the Time Warner Center (now the Deutsche Bank Center), 35 Hudson Yards, and many of New York City’s landmark buildings, died on March 26 at age 83.

“David was the most humanist of architects,” said Kenneth Lewis, of Skidmore, Owings & Merrill (SOM), where Childs served as chairman emeritus until 2022. “He cared about us, he cared about our city, and he always had time to bring that to the table as we were working.”

You can read his whole obituary here, but suffice to say a giant has passed.

See you next week.