UK film and TV studio space continues to expand
Despite a tough year, the UK film and TV industry is seeing continued investment in real estate as demand for original content rises.
4 minutes to read
Total stage space in the UK has risen with 1 million sq ft added in the past year, bringing the total to 6.9 million sq ft.
Over the past few years, streaming platforms, such as Netflix, Apple TV+, Amazon Prime, and Disney+, and more traditional broadcasters, such as Sky or the BBC, have been investing in film and television production to meet the rising demand for original content.
These streaming platforms are changing the leasing model; although they are still taking short-term leases as needs require, their strategy of leasing studios on a longer-term basis has helped to provide scheduling certainty for their large-scale, long-term content-creation plans.
The UK Film and Television Studios Market Report 2023 explores the latest dynamics and trends that are influencing real estate investment decisions.
The report shows continued appetite for high quality, original content, however future production spending is not expected to continue as it has in the last few years.
For the most part the major streaming platforms have satisfied their requirements for studio space, at least for now.
There aren’t any other platforms that require large scale (500,000+ sq ft) dedicated facilities. That is not to say that demand for studio space is not still rising, but the scale and type of facilities, their locations and the leasing structure will not necessarily be the same as that needed by the major streaming platforms.
The operational segment of the market is likely to grow to facilitate a rising number of smaller players. This will present more diverse investment opportunities in terms of scale and location, requiring greater sophistication, specialisation, and market knowledge.
Below are the top 10 key findings from the report:
- Total stage space in the UK stands at 6.9 million sq ft, with 1 million sq ft added in the past year and 71% of all stock in London and the South East.
- Many significant tax incentives are targeted to help the film industry in the UK. However, the revaluation of business rates that took effect in England and Wales on the 1st April, 2023 has become a significant cost for studios.
- Training and development of staff are paramount to the industry’s success, and many of the largest production studios and companies are now recognising this. Screenskills estimates that there could be a shortage of 15,130 to 20,770 crew by 2025.
- The advent of the Master Lease Agreement is changing the risk profile for many of the more prominent production stages, which are now permanently occupied/let to typically one of the big streaming platforms. Smaller studios are more likely to operate on short-term contracts.
- ESG credentials are becoming more critical to production companies and filmmakers, with newer studios built to high BREEAM standards amid efforts to reduce the carbon emissions of filming. However, challenges remain.
- Construction costs have risen across all sectors, with the BCIS build cost index rising 15.5% in the year to June 2022 but the last year has seen pricing stabilise with growth of 1.6% (year to June 2023). Coupled with higher financing costs, many new schemes are assessing their viability.
- Approximately £6.3 billion was spent on film and HETV production in the UK last year, corresponding with around 6.9 million sq ft of current stock. This would indicate that, on average, each £1 billion of spend on film and HETV production would require around 1.1 million sq ft of studio space.
- Expectations are that future production spending will not maintain the same course of growth experienced in previous years. With interest rate rises and following a period of rapid expansion and aggressive market share growth, streaming platforms are now looking at their costs and profitability with greater scrutiny.
- Under our high growth scenario, spending on film and HETV production would rise by £2.9 billion, reaching £9.2 billion in 2028. Based on current stock and spend figures, this additional spend would require an extra 3.2 million sq ft of studio space. Under our low growth scenario, we could see an additional £1.8 billion of spend, which would require a further 2.0 million sq ft of space by the end of 2028.
- Taking a centrist view as the mid-point between high and low growth scenarios, we would see total production spend reach £8.7 billion in 2028. The additional £2.4 billion in spending would need around 2.6 million sq ft of additional studio space.
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