Summary
- 2020 was a tough year for Los Angeles with Hollywood production significantly curtailed and tourism non-existent.
- However, 2021 promises to be a better year as Hollywood works through its production backlog and content spend for streaming services soars.
- While LA apartments saw rising vacancy and soft rents during 2020, the resumption and growth of content production should reverse these trends in 2021.
- Similarly, office leasing was very slow during 2020 and rent growth was muted.
- Kilroy Realty (KRC) and the Essex Property Trust (ESS) each derive 20+% of NOI from the LA area and will benefit as LA prospers.
While the headlines for anything related to California tend to be all doom & gloom, I believe that LA is on the precipice of a large, Hollywood-driven boom (I’m guessing 2H21) as:
- Working through the backlog of un-produced film & TV from 2020 as COVID shut down production schedules for much of 2020.
- More importantly, as you have all noticed, there are many well-funded streaming services which are in need of content to attract & retain subscribers, including:
- Apple TV
- Amazon Prime
- Disney + (DIS) - set to increase content spend dramatically between now & 2024 - at it's December Investor day, DIS doubled it's 2024 content spend expectations. This will force other services who are competing for consumers to up their spend and provide a competitive offering.
- HBO Max (T)
- Hulu
- Netflix (NFLX)
- Paramout - Viacom/CBS (VIAC)
- Peacock (CMCSA)
This will result in tens of billions spent annually on content, much of which will be spent in LA. Everything you see on TV has to be (this is a partial list):
- financed & budgeted
- written/scripted
- casted
- costume/prop
- set production
- directed, shot
- sound/music
- edited
- marketed
The LA/Hollywood production ecosystem includes the people, equipment, studios (40-60% typically shot in studio vs. on-location) required for the pre-production, production and post production process outlined above. Much of this was effectively shut down in 2020 (there are many jobs linked to the above) and while Hollywood money typically flows through the local economy, much of this was curtailed during 2020.
