The Georgetown Company has acquired the Hollywood Media Campus from Gemdale USA Corporation for $93 million. The property is fully occupied by Netflix, via a sublease from master tenant Zest Finance. Located at 1350 North Western
Avenue in Hollywood, the property totals 75,593 square feet and is on a 3.5-acre site. Over the last 12 months, Netflix has made investments in the property, which includes significant renovations to create a trophy-quality asset. Underscoring the existing stable occupancy. In addition, the property features a development opportunity on an adjacent 1.7-acre site. The owner can either pursue by-right
development under the existing zoning or seek a zoning change to increase density, according to Newmark co-head of U.S. capital markets Kevin Shannon, one of the brokers that worked on the deal. Newmark executive managing directors Ken White and Rob Hannan and senior managing director Laura Stumm represented the seller in the transaction.
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The Los Angeles office market was dislocated by the pandemic. In a report early last year from Marcus & Millichap, the vacancy was expected to grow by 160 basis points to 18.5%, and office rents will fall 1.4% to $37.50 per square foot. Surrounding markets saw an even higher jump in office vacancy, with areas like DTLA suffering from a 25% office vacancy rate, up 300 basis points from the third quarter 2020. In the third quarter 2021, 225,342 square feet of office space was vacated in the third quarter, a massive contributor to the increased vacancy rate. There was a paltry 163,924 square feet of leasing activity, but it did offset the move outs, resulting in negative 83,972 square feet of absorption. For the year, the market has negative 749,000 square feet of absorption. Despite the sluggish leasing activity, office rents increased to $45.96 per square foot.
Hollywood, however, seemed to weather the storm, thanks largely to technology-driven entertainment companies, like Netflix, which drove leasing activity in the market. They also drove investor interest, with companies like BLT Enterprises growing its portfolio from 200,000 square feet of office space and development space to 450,000 square feet of creative office.
According to Stumm, the Netflix transaction was particularly rare because of the quality of the asset. In a statement about the deal, he said, "A majority of the Class A office inventory in Hollywood is controlled by small concentration of owners with long-term holds, making opportunities to acquire institutional assets extremely rare in this market."
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Kelsi Maree Borland
