The B.C. Film Industry and Industrial Real Estate Shining a Spotlight: How the B.C
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The B.C. Film Industry and Industrial Real Estate Shining a spotlight: how the B.C. film industry is impacting the industrial real estate market in Metro Vancouver Northshore Studios, North Vancouver Accelerating success. The B.C. Film Industry and Industrial Real Estate Introduction The film and television industry is not often considered a typical industrial real estate user; however, it is an industry that now occupies a significant amount of such space in Metro Vancouver. This Spark Report will provide an overview of the British Columbia film and television industry, and outline this industry’s impact on the industrial real estate market in Metro Vancouver. Firstly, we will examine the ideal building specifications for film and television productions, followed by a discussion on the impact of the industry on the Metro Vancouver market. Secondly, we’ll provide a summary of the two primary types of users of industrial real estate from the film and television industry. Thirdlly, the industry’s production figures ($) over the past ten years are detailed. Lastly, factors impacting the film and television industry’s demand for industrial real estate in B.C. will be summarized, with three main factors outlined: (1) tax incentives, (2) the Canadian (CAD) to US Dollar (USD) exchange rate and (3) the “Netflix Effect”. This paper will conclude that the high degree of flexibility with respect to production location in combination with the typical short- term lease requirement (six months or less), may cause the overall demand for industrial space in the Metro Vancouver area from this segment to change quickly. However, given the significant amounts of investment in human and physical infrastructure in the local film and television industry, in combination with the B.C. government’s agility around tax incentives, if there is a change to an external factor impacting film and television productions, demand for industrial space is likely to remain strong in the short to medium term. 1 Ideal Film Production Building Specifications The ideal film production building has the following characteristics: • Minimum 24’ clear ceiling height (the higher, the better) • Minimum 30’ x 30’ column spacing (less columns or clear span preferred) • Ample existing office areas or ability to expand office areas • Ample parking whether in a parking lot or loading court for regular vehicles and trailers • Fibre optic internet connection or similar • Soundproof building construction or ability to soundproof • Building footprint to allow flexible demising configurations; each sound stage will typically be between 10,000 – 30,000 SF Location Considerations: • Proximity to downtown (Some actor • Noise considerations – not below flight • Proximity to transit or SkyTrain a contracts require the studio to be within path, or adjacent to a hospital, police positive a certain driving time) station or fire hall with consistent sirens 2 Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada The Impact of the Film and Television Industry on Industrial Real Estate Creative B.C. maintains information on active studios operating in B.C. and categorizes them into purpose-built, conversion or outside zone (outside zone refers to the location being outside the designated area that qualifies for tax incentives). From Creative B.C.’s list, the amount of studio space in Metro Vancouver totals to 2,196,995 SF as of April 2017. Of the total amount of studio space in Metro Vancouver, 1,078,167 SF or 48% is in Burnaby, with 838,491 SF being purpose built, and the remaining being conversion studio space. The second largest amount of studio space by municipality is in Vancouver, at 437,340 SF or 19.5% of the total studio space. 189,540 SF of Vancouver’s total studio space is purpose built and 247,800 SF is conversion studio space. Studio Space by Type and Municipality 900,000 838,491 800,000 700,000 SF) ( ea Ar 600,000 io Stud 500,000 tal To 400,000 300,000 265,822 239,676 247,800 200,000 178,336 189,540 100,000 64,800 55,300 31,360 41,326 44,544 0 DeltaBurnaby LangleyMaple RidgeNorth VancouverVancouver Coquitlam Conversion Outside Zone Purpose Built Source: Creative B.C. Overall, the amount of studio space in Vancouver and Burnaby is a small percentage of their total industrial inventories. As of Q1 2017 Vancouver’s total industrial inventory is 20,032,767 SF and Burnaby’s total industrial inventory is 25,821,746 SF. However, studio space does not account for the full amount of industrial space associated with the film and television industry. Additional demand comes from production companies that lease short-term industrial space in buildings that are not purpose built and have not been converted to studio space. As such, the total amount of industrial space being utilized by the film and television industry is greater than the 2,196,995 SF of studio space noted by Creative B.C. Unfortunately, this amount is not accurately tracked as it fluctuates substantially. As of Q1 2017, the industrial vacancy rate for Metro Vancouver was 2.2%, up from 1.7% in Q1 2016 (over the past ten years the average vacancy rate was 2.9%, the median vacancy rate was 3.3%, the lowest vacancy rate was 1.1% and the highest vacancy rate was 4.8%). The very strong demand coming from the film and television industry is only exacerbating the lack of available industrial space. However, the total amount of studio space in Metro Vancouver is, in reality, not a significant amount of the total inventory (1.1% of the total inventory as of Q1 2017) and is even less significant further from the downtown core. That said, industry watchers claim that the demand from the film and television industry will likely continue as long as the USD to CAD dollar exchange rate is favorable for U.S. production companies. Even if the USD to CAD dollar exchange rate were to become less favourable, the B.C. government has been and continues to offer very attractive tax incentives that could be adjusted to offset a less favourable exchange rate. This is positive news for the B.C. economy as the film industry provides a large number of jobs both directly and indirectly, and is a relatively environmentally clean industry. 3 Film Studios, Production Companies and Industrial Real Estate There are two main types of users of industrial real estate Production companies can be local or foreign, but are typically associated with the film and television industry. The first, film and from Southern California and around Los Angeles. Some television studios (hereafter referred to as “studios”), may lease examples of production companies include Paramount Pictures, or own industrial real estate. The second are film and television Warner Brothers, Nickelodeon, Lifetime, Fox, N.B.C. and Alcon production companies (hereafter referred to as “production Entertainment. Studios are able to provide several services to a companies”), which lease industrial real estate, usually from production company that help make a facility “move-in ready” on a studios, but sometimes directly from landlords. Studios are short time frame including furniture, IT set-up, property and facility typically local companies and hold industrial real estate with management services (typically far faster than a normal Landlord the intent to license the space to production companies while would provide), lighting, soundproofing and demising, among providing a host of additional industry specific services. Some other things. The speed at which these kinds of services can be of the studios currently operating in Metro Vancouver include provided to production companies is of utmost importance since The Crossing Studios, Vancouver Film Studios, Canadian Motion the film industry works at an exceptionally fast pace. A production Picture Park, Bridge Studios, North Shore and Mammoth Studios. company will often pay a premium to lease space through a studio The older, more established studios tend to own their facilities because they can occupy a property for only the period of time instead of leasing them, such as Vancouver Film Studios, Bridge they require it, secure consecutive short-term options to renew, Studios, North Shore and Mammoth Studios; these companies occupy a facility fully furnished with no maintenance, and have a have well-capitalized parent companies including The McLean team of staff on-hand to immediately deal with any issues with IT, Group, Larco Investments Ltd. and Bosa Development Corporation. services, or the facility. In contrast, the newer, but perhaps more entrepreneurial and fast- moving studios tend to lease their facilities. It is the newer studios like The Crossing Studios that are able to accommodate current demand because the traditional studios are at capacity. The Crossing Studios – 8355 Riverbend Court, Burnaby, BC 4 Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada B.C.’s Film and Television Industry Production Volume - 2006/07 to 2015/16 The following chart indicates each province and territory’s total film and television production by dollar volume ($ millions). For 2015/16, Ontario has the greatest dollar volume of film and television production totaling to $2,618,000,000; British Columbia trails Ontario with the second greatest amount of film and television production volume at $2,151,000,000. Total Volume of Film and Television Production in Canada by Province and Territory Share of total ($ millions) 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14