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Institutional Investor Appetite Grows for Sound-Stage Assets
The public’s growing appetite for streaming video content, which has accelerated during the COVID-19 lockdowns, has ignited demand for sound-stage real estate in several North American markets, according to a new report from CBRE. That growth hasn’t gone unnoticed by institutional investors either, which are drawn to the sector’s tight vacancies and rising rents.
CBRE’s Jeff Pion, who has advised on numerous production space transactions, says, “Production space now is coming into its own in North America as an asset class recognized and pursued by institutional investors. The recipe is enticing: Growing demand for content, limited availability of sound stages and rising rents for that space. That is drawing in more institutional capital.”
Sound-stages, often called production space, still are a niche market, totaling roughly 11 million square feet across six leading entertainment-production markets. Los Angeles is the dominant market with about half of the sound-stage space. Other markets with growing production space include Atlanta, New York City, British Columbia (primarily Vancouver), Ontario (primarily Toronto) and Louisiana (primarily New Orleans). CBRE notes, these markets are expanding due to lower costs for labor and real estate and economic incentives earmarked for the industry.
CBRE reports occupancy rates in major markets hover above 90%, and an influx of institutional capital into the sector has encouraged standardization of formats and operations. Capitalization rates for sound stages are edging closer to those of other, more liquid asset classes.
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