The rising tide of original online programming is lifting the fortunes of L.A. landlords.
Hudson Pacific Properties reported an 8.6 percent uptick in revenues in the third quarter, thanks in part to an increase in demand for space from the media and entertainment sectors.
Its total revenue was $164.6 million, up from $151.6 million during the same quarter a year ago. Revenue from its media and entertainment properties increased by 22.1 percent to $12.5 million year-over-year.
Hudson CEO Victor Coleman attributed a portion of the growth to the firm’s relationship with streaming and online video company Netflix, which recently inked a deal to lease multiple stages and production offices totaling 99,250 square feet at Hudson’s Sunset Bronson Studios in Hollywood. Netflix is also leasing the entire 323,000 square feet at Hudson’s adjacent Icon office development on West Sunset Boulevard.
Netflix now accounts for a total 420,000 square feet in Hudson’s portfolio.
“All of our various deals with Netflix highlight the massive shift in content,” Coleman said on the third quarter earnings call, noting that AT&T’s prospective acquisition of Time Warner signals further industry realignment. “As a growing number of media companies spend billions to produce a pipeline of original content for streaming anytime anywhere, our studio ownership affords us unparalleled facilities and capabilities to participate in that growth.”
“By capitalizing on these industry shifts,” he continued, “we expect studio cash flow to continue to become increasingly predictable and digital office space even more valuable. This confirms our original investment thesis regarding the studios — that this is an element of our business with significant potential to grow.”
Coleman said he expects Hudson to be able to provide production space to other companies now dabbling in the content space, including Google and Amazon, as they build out their digital infrastructure, global branding and distribution.
Amazon has been developing its own shows, including “Bosch” and “Transparent” which are filmed in L.A. Netflix, which has original series hits like “Orange is the New Black,” also recently announced that it plans to have 50 percent of its content be original within 24 months.
“These streaming media companies don’t really own their own fiscal facilities or professional studios,” said Bill Humphrey, general manager at Hudson. “So they need to figure out a way to or use terminal warehouse space. They’re going to up the spending. All the other players around them are going to do the same. So the demand is continue to increase, the amount of supply on this side in LA in going to stay pretty stable so we’ll still be in a very, very strong position.”