Purchase Represents the Global Developer's First Foray Into Production Space
By Jack Witthaus CoStar News
March 3, 2022 | 1:48 P.M.
Houston firm Hines has joined the parade of big-name investors seeking to capitalize on the frenzied demand for movie and TV real estate by buying up the land beneath a giant geodesic dome now serving as a media studio.
The global developer bought the dirt beneath the roughly 30,000-square-foot, golf ball-like Burbank Media Studios Phase VII and VIII for $42.5 million on Feb. 25, according to CoStar data. The deal represented Hine's first foray into buying production space.
The seller, Santa Monica, California-based Worthe Real Estate Group, is one of the biggest owners of production real estate in Los Angeles. New York entertainment company Madison Square Garden Entertainment controls the 2-acre property's improvements, or structures above the ground, through a long-term ground lease, according to a statement. Terms of the ground lease weren't immediately known. MSG Entertainment was preparing to use the property to develop and edit content that's used in Las Vegas productions, according to the city of Burbank's website.
Representatives with MSG Entertainment and Worth Real Estate did not respond to requests for comment from CoStar, and a Hines representative declined to disclose the price. The property sits in the entertainment-heavy city of Burbank where Warner Brothers and The Walt Disney Company have their headquarters.
"Studios are an attractive asset to complement our already strong presence in the region,” Varun Akula, managing director of the U.S. west region at Hines, said in the statement. “Studios are experiencing a period of rapid growth in demand, due to expanding entertainment investment, and this acquisition is a significant catalyst for our continued growth across the western U.S.”
The appetite for content creation has been driven largely by streaming companies such as Amazon, Apple, Netflix and more. Amazon spent $13 billion on content in 2021, up from $11 billion in 2020, and Netflix is expected to spend $19 billion on content in 2022, up from $17 billion in 2021, according to industry estimates.
These companies, along with smaller streamers such as Peacock and Paramount+, are competing for global subscribers in what's been dubbed the streaming wars. That feeds into the $220 billion in total global entertainment content spending, which includes streaming video on-demand platforms, as spending is expected to reach $230 billion in 2022, according to London media research firm Ampere Analysis.
It's unclear when content spending might level off, which would result in less demand for real estate catering to this industry. Industry research firm FX Content Research reported in January that there was a record-setting 559 scripted TV shows in 2021, showing that demand is still swelling for more content.
The Burbank deal is the latest for Hines in greater Los Angeles. The Houston company purchased the 203,000-square-foot J.C. Penney at 6000 Hannum Ave. in Culver City, California, for $22 million, or about $108 per square foot, in January. In December, it acquired roughly 150,000 square feet of office space in Torrance for around $41 million, according to CoStar data.
Overall, Hines owns roughly 15 properties in greater Los Angeles totaling more than 2.4 million square feet, according to CoStar data.