Ground-Up Hollywood Office Projects Are A Bet On Brighter Days Ahead
The undeniable demand for streaming content hasn't spared the country's entertainment capital from high office vacancies, but the development team behind two new planned office buildings is preparing for a post-coronavirus pandemic Hollywood where tenants are clamoring for space.
A pair of projects, one on Vine Street and another on Seward Street, are moving toward groundbreaking and a 2024-2025 delivery as the future of the office is being hotly debated and company downsizings seem likely. But these projects are a vote of confidence not only in Hollywood’s staying power as a creative industry hotspot but also in the desire of those working and staffing the industry to continue to collaborate in person, especially in creative office buildings, once they are able to do so.
“I think we’re confident that by 2024, 2025 and beyond, the world will be back to a normal place and people will be going back to their offices,” said Mick Unwin of Plus Development Group, which has teamed up with Matt Cooper, the co-founder of production company The Post Group, and the Cooper family to build the projects.
Reports on the office market throughout the more than 10 months of the pandemic and as recently as Q4 2020 have indicated that entertainment and media tenants, spurred by the demand for digital content, continue to boost office demand in certain LA hubs. Companies across all industries will continue to reassess their space, a Q4 report from Newmark predicted, but once the film and production crews are working at 100%, there will be “a surge in demand” for studio and related office space from these companies that blur the line between media and tech.
The present offers a harsher picture. Asking rents in Hollywood increased from $4.53 per SF in Q3 to $4.77 per SF in Q4, according to Q4 2020 report from The Hollywood Partnership, a business improvement district that includes much of Hollywood. But rents have declined from their Q1 2020 peak, according to CoStar data, and vacancy in Hollywood has spiked to almost 17% — above the current LA office market average of 12.8%.
Hollywood office vacancy is the highest it has been in at least 25 years, CoStar Director of Market Analytics Ryan Patap said in an email to Bisnow. But it isn’t all gloom and doom in Hollywood.
“There is still incredible demand for content, which should support tenant demand when conditions normalize,” Patap wrote.
1235 Vine and 1000 Seward are, naturally, planning to sign tenants in the media businesses or in other creative industries.
Plans call for the Seward Street property to rise 10 stories with just over 130K SF of creative office space and about 15K SF of “combined retail/restaurant/hospitality/entertainment area,” according to Plus’ website. The developers expect the Vine Street development to hold 117K SF of office space and nearly 8K SF of street-level retail space within an eight-story structure.
The properties were originally purchased for use by The Post Co., which specializes in post-production work. Since Cooper’s main business is entertainment, the design “incorporated many of those perceived needs into our design,” he said.
The pair of buildings will be designed by London-based architecture firm Hawkins\Brown. Renderings for both projects show outdoor terraces, expanses of windows and a sort of industrial look that has become a hallmark of creative office spaces across the city. Air filtration systems, wider corridors, and touchless entry to the buildings and their restrooms round out the ways the design has been influenced by the pandemic, although developers hope it will be in the rearview mirror by the time both buildings open.
The development team’s projects are both located in the heart of Hollywood, in clusters of entertainment and media developments. 1235 Vine will rise a block south of On Vine, a Kilroy Realty residential and office complex where Netflix leased all 355K SF of office.
The project planned for 1000 Seward is across the intersection from 959 Seward studios, which sold in late December to LPC West, an arm of Lincoln Property Co., and Geyser Holdings for $186M. 959 Seward counted Netflix, Capitol Records and ViacomCBS among its tenants at the time.
“We think that post-COVID, low-rise campus environments with great outdoor space are going to be heavily sought after,” Rob Kane, executive vice president of LPC West, told the Los Angeles Times at the time.
The sale of 959 Seward was one of many high-profile transactions involving studio-related assets in Hollywood and one that experts say indicates that investors are also prepared for boom times after the pandemic is under control.
The fact that companies like Netflix have put down significant roots in the area and continue to broaden their footprint there seems to be a positive indicator for the neighborhood’s office space, Davon Barbour of The Hollywood Partnership said.
“The digital media, film, television industry are core to our genes” in Hollywood, Barbour said.
Both developments are working their way through the city planning process and are expected to begin construction no earlier than 2022.