LA Agents Talk Hollywood’s Impact on Residential Dealmaking

The Agency’s Craig Knizek used to produce “Mad About You.” Now, the 20-year film and TV veteran produces spec developments through his firm Prescott Properties.

If anyone can take the skills used in Hollywood and apply them to real estate, it’s Knizek, who was also “The Simpsons” original associate producer and counts a who’s who of Hollywood making up his client base.

“There’s a saying that you can make a killing, but you can’t make a living in the entertainment business and that seems extraordinarily true today,” Knizek said.

In a region long viewed as a company town, Hollywood has always loomed larger than life as a tourist draw, revenue driver and major employer. Today, things are more stagnant. That’s laid bare in the effects on residential real estate, a local profession that’s unique in its large makeup of established and hopeful film and TV players that flock to selling for second acts.

It’s difficult to peg a specific timestamp for when Hollywood began its slow slip. Some say a decade ago. Others point to the birth of streaming services such as Netflix, which launched in 1997. Regardless, a confluence of factors conspired against the industry, including a lack of incentives to keep production in California and a paradigm shift in the business model that favored shorter series being churned at a rapid clip from streamers over network TV’s 20-plus episodes per season and rerun residuals.

That’s impacted residential submarkets such as Burbank, Valencia in the Santa Clarita Valley, Studio City and Mar Vista where many in the industry called home.

“People are getting work sporadically, so that has a real hallowing out,” Knizek said. “The whole business model shift is dramatically impacting where people live.”

If there’s one bright spot, it may be that the state’s film and TV industry was the only creative segment to see growth, according to Otis College of Art and Design’s annual “Report on the Creative Economy,” released last month.

The industry added 14,670 jobs last year, according to the report. While the figure is upbeat, the industry’s 2024 payroll was still down 25 percent from a 2022 high created during the pinnacle of the pandemic’s shelter-in-place orders that had the country hooked on series such as “Tiger King” and “The Last Dance.”

If industry employment is showing any signs of a rebound, agents in the residential market aren’t seeing it just yet.

Cash is king — if you have it

Instead, the new normal in residential is fewer deals among those the industry calls “below the line” workers — or day-to-day pre- and post-production talent typically earning hourly wages.

Paul Lester, The Agency co-founder and member of the brokerage’s Pad and Associates team, said about half of his client base is comprised of producers, director, actors, costume design, music and other disciplines within entertainment.

He’s noted a pause that’s taken a hold on residential dealmaking coming out of the 2023 strikes that included the Writers Guild of America and Screen Actors Guild–American Federation of Television and Radio Artists. The WGA strike ended in September 2023 after 148 days, while SAG-AFTRA ended after 118 days in November 2023.

“I would say for 75 percent of the industry they’re either on hold, taking a breath, or going slowly into the market, needing to borrow funds to make the transaction happen,” Lester said.

One of his clients in animation, a challenged segment given the rise of artificial intelligence, has had to pivot for work. He and his family also needed a new home. With the couple’s money tied up in the old home that hadn’t yet been sold and the new address being pricier, they took out a bridge loan nearly the price of the new house in order to get a deal done.

Fewer people paying all cash began around the time of the strikes and in the months following with many jobs that went unfilled during the work stoppage never refilled. Since then, some buyers have made lateral moves, for example, moving from a $2 million home into another $2 million property. In other cases, buyers are increasing their financing, with Lester seeing 50 percent to 60 percent loan-to-value ratios in scenarios that may have been all cash in the past.

“There was this rethink in the buying power of people in the industry because they realized, ‘I’m not getting back the income that I had. I need to readjust,’” Lester said.

Relocation services are also up for consideration more than before, although there hasn’t been a rash of that type of movement to suggest a full-on trend.

A costume designer Lester works with moved back to New York from Los Angeles temporarily due to fewer opportunities locally. New York made sense because it’s closer to London, where she’s finding more work at the moment.

It’s a different story for another segment of the industry.

For A-list directors and actors or high-up studio executives, a cash crunch was never an issue. Some may have paused buying and selling in the wake of the strikes for the sake of solidarity, but inactivity isn’t forever, pointed out Jonathan Nash of Carolwood Estates’ Resnick & Nash team.

“I think for a lot of people, it’s optics,” he said. “When the rest of the industry is clubbing together to effect change, a lot of people withheld major investments in a show of solidarity,” Nash said. “We’re typically dealing with those in the market who didn’t find themselves without funds.”

Generally, that’s working in markets such as Beverly Hills, Bel-Air and the Hollywood Hills.

“The strikes of course caused a slowdown in the market that was already a bit slower in the lead up to the election with the increased interest rates,” Nash said. “But, as of late, in light of the new administration and the strikes becoming more of a distant memory, people have suffered fatigue not doing anything with their homes. So, starting with the end of last year, we’ve seen an uptick of transactions.”

State of emergency?

Some in the industry are hopeful Gov. Gavin Newsom’s proposal to expand the Film & Television Tax Credit Program might help woo production back to the state, thereby generating more jobs.

Senate Bill 630 was introduced in February and aims to expand the annual tax credit ceiling to $750 million from $330 million.

Beverly Hills Estates co-founder and President Branden Williams isn’t letting Newsom and other politicians off the hook that easily. As he surveys the landscape of what’s left of the local entertainment industry, he’s pinning affordability issues and higher business costs on those in power

“I blame this on Gavin Newsom,” he said. “I blame this on [Mayor] Karen Bass for not immediately giving tax breaks to Hollywood. This is very similar to the ULA mansion tax.”

Measure ULA, which voters passed in November 2022, applies a tiered tax to residential and commercial properties in the city of Los Angeles. Each year, the tax is adjusted in line with the chained consumer price index, which weighs how consumers change their spending habits when prices rise. The new floors for the tax go into effect June 30 and apply a 4 percent tax on properties starting at $5.3 million and 5.5 percent for those $10.6 million or more.

From Williams’ perspective, ULA “hurt everybody” by making it pricier for residential deals, but also studios or production firms that use industrial or office space.

Some also point to 2019’s Assembly Bill 5, largely aimed at ensuring gig economy workers had access to benefits as another regulation gone wrong for Hollywood. Some freelancers opposed the law on grounds of work drying up from companies only seeing more costs associated with reclassifying workers from freelance to employee under the new law.

“I used to see filming, commercials, print ads and movies being filmed all over our city,” Williams said of growing up in Los Angeles, near the Beverly Center mall. “It was so exciting seeing a shoot going on in Hollywood, not to mention if you were out of town on vacation.”

The landscape’s different now, according to Williams, who has also acted and directed. When he first got into selling real estate, the majority of his clients were actors, writers, producers and agents.

“Now you barely see any of them,” he said. “And a lot of them now are selling and saying, ‘We’re out of California. We’re out of Los Angeles. It’s too expensive.’”

That includes a friend of his, an actor on a television show, who recently moved to Texas, citing the Lone Star state’s affordability. His friend isn’t an anomaly as California, in more recent years, has seen residents leaving the state in favor of places such as Texas.

“This is an emergency and [politicians] better do something about it now, but seeing what they’ve done to our economy, I have zero faith,” said Williams as he railed against local and state politicians. “We better think about how we vote next time.”

The Agency’s Lester is a bit more hopeful. As the aftershocks from 2023’s strikes subside, he feels there may be the chance for a bounce back.

Will residential activity from Hollywood come back this year? Maybe. Like anything in real estate, losses — whether deals or clients — are always viewed as temporary by those whose livelihoods are built around the art of the hustle. As Lester pointed out, “Where I was seeing an actor buy a great house in Beverly Hills Post Office, now it might be the investor in tech replacing that buyer.”