Fast-growing Netflix Inc. is making its most aggressive move yet into a territory dominated by its rivals, media giants such as Walt Disney Co., Warner Brothers, and Nickelodeon. And this time, the streaming video company is gunning for one of Mickey Mouse and friends' most valuable assets: its animators.
Netflix has signed a lease for 171,000 square feet at the Burbank Empire Center at 2300 W. Empire Ave. in Burbank, California, for its first dedicated animation studio, on the other side of the Hollywood Hills from its main production campus in Hollywood. The Burbank property is owned by the real estate investment arm of the life insurance company New York Life, which confirmed by e-mail on Monday that Netflix had signed a lease with the firm.
Netflix, which has created shows including "Stranger Things" and "Orange is the New Black," agreed to take an initial estimated 150,000 square feet and plans to expand by roughly 21,000 square feet at the property in the future. The Los Gatos, California-based company's space includes all of the seven-story building's first floor as well as space on floors three, six, and seven.
The deal is the largest new office lease signed this year in metropolitan Los Angeles, where the pandemic has brought much of the entertainment industry and office market to a standstill.
The Burbank Empire Center, spanning more than 351,300 square feet, is now 100% leased, according to brokers at CBRE Group, which represents the landlord but declined to name the tenant involved.
Netflix itself did not respond to requests from CoStar News.
Burbank has long been the center of gravity for major animation work, with huge blocks of office space leased by Nickelodeon and Walt Disney Co. as well as Warner Brothers, Marvel Studios and other media giants that are racing to build competing online streaming platforms. Dozens of smaller companies, most recently Titmouse Inc., have also signed deals to be among other animation firms in Burbank.
Netflix intends to create its first, fully dedicated animation studio at the site, and chose the Burbank Empire Center because of its proximity to competitors' animation hubs, according to three sources familiar with the deal but who were not authorized to speak about it.
As the streaming wars heat up among major tech and media firms, Netflix executives have been focused on beefing up the company's animation offerings, which included the Oscar-nominated Christmas film "Klaus" that was released last year. It has also tapped prominent former Disney animator Glen Keane, who worked on Disney's "The Little Mermaid" and "Beauty and the Beast," to create Netflix's upcoming animated musical "Over the Moon," in a move that sent a buzz through Hollywood trade publications at the time.
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In a January call with investors, Netflix Co-CEO Ted Sarandos said that the company has been ramping up its feature animation for the past three years.
"So these are big theatrical-scale animated features and big-scale feature films that would be competitive with anything you'd see in the box office," he said on the call. "And I think people really do value them."
That same month, Netflix signed a multi-year deal with animation studio Titmouse, which created Emmy-nominated adult animated sitcom "Big Mouth," to produce multiple original adult animated series.
Netflix's deal with Titmouse marked an expansion of the relationship between the two companies, which have partnered on several series, including the "The Midnight Gospel," an adult-oriented series from creators Pendleton Ward and Duncan Trussell. It was released on Netflix in April.
Titmouse revealed in February that it was moving into 95,000 square feet at Media Center North, 2835 N. Naomi St., in one of the largest greater L.A. leases of the past year at that time.
The Netflix deal at Burbank Empire Center is one of a growing series of leases executed by Netflix in Burbank over the past two years. In October 2019, CoStar News reported that Netflix signed a lease at Burbank Studios and was looking for more space in the city for temporary and permanent use.
The company also leases space at two buildings that neighbor Burbank Empire Center, formerly occupied by post-production firm Deluxe Entertainment, 2350 Empire Ave. and 2400 Empire Ave. Netflix has 33,000 square feet of space in each, according to CoStar records.
Burbank is the more suburban counterpart to the high-dollar glitz of Hollywood. The city has a deep and long-established ecosystem of pre-production and post-production services, as an ample supply of entertainment workers who came up through prominent companies like Disney and Warner Brothers offers more affordable housing and office alternatives.
Media companies have not typically gravitated this far north in Burbank but major expansions by companies including Disney in the more popular entertainment areas have pushed demand to the outer edges of the city.
Office tenants and owners once considered the Burbank Airport area a secondary location after downtown and the Media District off Highway 134, however, because of its available large blocks of office space, Empire Center and other buildings near the airport are now becoming the go-to location for tenants, said Bill Boyd, executive vice president of brokerage Kidder Mathews, who was not involved in Netflix's deal.
"This lease is a nice validation that the airport area is viable, that entertainment wants to stay in Burbank," said Boyd, who has worked in the Tri-Cities region that includes Burbank for decades. "There was some thought a few years ago that entertainment and media tenants will bleed into adjacent markets like Glendale and even Pasadena, but entertainment has always demonstrated that it prefers to be in the same area, whether that be to poach other talent or not."
Netflix Director of Corporate Real Estate London Kemp told CoStar News in the summer 2018 that its footprint "is growing exponentially," and its ambitions go far beyond the Las Angeles region.
At the time, Kemp said that the company had 18 locations worldwide on every developed continent and was still looking.