Show Biz Firms Leave Hollywood : Real estate: Lack of new office space there and aggressive recruitment by developers in other Los Angeles areas are behind the shift.
Stymied by a lack of new office space in Hollywood and enticed by aggressive developers elsewhere, a growing number of entertainment companies are leaving the world’s show business capital and congregating in Los Angeles County entertainment centers with more modern facilities.
The Hollywood departures announced in recent weeks by half a dozen firms, such as the music publishing company Warner Chappell Inc. and the Univision Holdings Inc. TV network, are the latest fallout from an office glut that has set off a costly game of musical chairs in real estate. Landlords in overbuilt areas are competing fiercely to lure companies from old, antiquated buildings by promising them competitive rents, modern accommodations and fancy amenities such as car washing and fitness facilities.
“The trend is definitely for more companies to leave, “ said H. Carl Muhlstein, executive vice president of the Willrock National of California brokerage firm, which helped Warner Chappell secure office space in a new building that has a small recording studio, a fitness facility and car wash service. “There hasn’t been any new construction in the Hollywood area for years.”
As a result, he said, many firms are defecting to such emerging media centers as Culver City, Century City, West Los Angeles and Burbank.
Other business districts have been similarly transformed by a 1980s building boom that has nearly doubled vacancy rates to more than 18% in Southern California and left California and much of the rest of the nation with enough new office space to meet demand for the next five years.
The Los Angeles International Airport area, once home to many aerospace firms, has seen vacancies soar in the 1990s in the wake of overbuilding and defense industry cutbacks. Recently, the area has rebounded somewhat with an influx of import/export companies that want to be near the airport.
But in Hollywood, a turnaround is not in sight. Few new buildings were built there in the 1980s, and the area continues to suffer from a seedy image and lack of large lots on which to build, officials say.
“When the office construction boom was going on, Hollywood wasn’t able to take advantage of it” because no development plan was approved, said City Councilman Michael Woo, whose electoral district includes Hollywood. “It was only when the economy slowed down that our redevelopment efforts began to pick up. We are real concerned about further departures. We hope it’s not too late to reverse the trend.”
Early last month, Warner Chappell signed a $21-million lease to move its 45,500-square-foot offices to a building on Santa Monica Boulevard. The move came just days after Univision, which has been based in Hollywood for 31 years, signed a 10-year, $14-million lease for 50,000 square feet of space in a new West Los Angeles building owned by Summa Corp.
“We spent almost four years looking at nearly every site in Hollywood,” said Michael Martinez, general manager of KMEX-TV. “Our goal was to stay in Hollywood and consolidate the operations of our four facilities. But we just could not put a deal together that we felt comfortable with.”
Hollywood business and government leaders say they are doing all they can to retain entertainment companies. And some well-known firms are staying.
Geffen Records is remodeling its Sunset Boulevard offices, and television station KTLA has announced plans to add an $80-million production center to its Hollywood complex.
But others have become frustrated by lack of new office space and slow progress on the $922-million Hollywood Redevelopment Plan. Last October, the California Supreme Court threw out the final legal challenge to the project. But the plan won’t have much financial muscle until next month, when officials will seek to raise $40 million in the bond market.
Meanwhile, developers are busy luring companies away.
Besides Univision and Warner Chappell, Modern Film Video plans to leave Hollywood for about 60,000 square feet of office space in Burbank. Playboy magazine is moving its Hollywood offices to Beverly Hills.
Hollywood-based Fox Television and KTTV Channel 11 plan to move to Fox’s Century City lot in 1995. Even the industry’s venerable trade magazine Hollywood Reporter is planning to move out of its namesake city to the Mid-Wilshire area this year.
“The entertainment industry continues to be one of the few growth industries in Los Angeles,” said Rick Newman, vice president of Lowe Development Corp., which is building a West Coast headquarters for Sony Music in Santa Monica. “We have targeted that niche of the market because they are just about the only” expanding industry around, he said.
