Recovery on the horizon
Demand from entertainment companies for production space has bounced back swiftly since the start of the year with Hulu newly taking 351,000 SF of space and Snapchat expanding into 145,000 SF of space.
Technology and entertainment companies continue to expand while traditional office space muddles along.
Many companies are adopting a hybrid work arrangement with their employees, leading executives to further assess and execute their long term space needs. Many landlords remain reluctant to devalue their buildings by lowering asking rents but continue to offer free-rent and parking concessions to keep existing tenants.
Downward pressure remains on market-wide asking rents
The direct weighted average asking rental decreased to $43.72 PSF market-wide due to increased availability of sublease space.
Asking rents are not declining uniformly however as the market is bifurcating between newer creative space desired by entertainment and technology tenants and more traditional office space.
Commodity space is seeing significant downward pressure on asking rates but newly constructed space near Culver City is hitting all-time highs.
Property owners of this commodity space must contemplate changes to make their properties stand out, with building safety measure being the first thought in most tenant's minds.
Production space & data center sales dominate
Office investment remains subdued with sales volumes of only $1.9 billion in the first half of 2021. Of this amount, a majority of the investment sales were for data centers and production studios as opposed to traditional office space.
One of the larger sales was Hackman Capital purchasing Sony Animation Studio in Culver City. Hackman Capital Partners has emerged as one of the leading operators of studio media properties and has greatly added to its portfolio during the pandemic.
Future improvements by Hackman include a $1.3 billion overhaul of Television City, the former CBS studio space. Improvements include adding 700,000 SF of office and production space for the growing entertainment industry in the region.