Hollywood’s history dates back to its roots as an agricultural community in the late 1800s, though its worldwide claim to fame began circa 1910 with the establishment of some of the industry’s most iconic film, and later television and music, production studios. Ever since, Hollywood has become an icon for entertainment, glitz, and glamour, with buildings such as the famous Chinese Theatre and events like the Oscars drawing visitors and viewers from across the globe.
Hollywood’s hotel industry has flourished over the past century, though the 2008/09 recession and its impacts in the ensuing years cut into the pace of development and performance growth. Occupancy levels and hotel development are back on track, however, with new boutique and independent properties at the forefront.
A Rocky climb for New Developments in Downtown Hollywood
In 1986, several Community Redevelopment Agencies (CRAs) were created in Los Angeles to accelerate revitalization, with one of the CRAs in Hollywood. The plan had two components. The first identified the shopping and entertainment complex known as Hollywood & Highland as a tourist zone. The second designated the historic intersection of Hollywood Boulevard and Vine Street (Hollywood & Vine) as a commercial and residential zone. After years of struggles and setbacks, including some failed developments, a few key acquisitions and projects led the way for success for the Hollywood CRA.
The first two major developments were underway just prior to the 2008/09 recession. These were the Sunset and Vine apartment complex and the Sunset and Vine tower by CIM Group, which opened on New Year’s Day 2010. These developments helped re-establish a luxury image for the heart of Downtown Hollywood and have been a major draw for visitors, as well. As investors started to see the potential, more projects broke ground. The aftermath of the recession, however, brought many of these projects to a halt as investors pulled out.
The construction of the luxury, full-service W Hollywood hotel, which opened in 2010, broke with the trend of stalled or canceled developments. In the years since, real estate development has resumed with a force, and an adaptive reuse ordinance has allowed for the innovative redevelopment of historic 1920’s office buildings, most of which had been standing vacant.
Residential Construction, Improved Class A and B Office Space
Hollywood is in the midst of a residential and commercial office space revival that mirrors the area’s sharp rise in population. From 2000 to 2015, both the number of residential units available and the resident population in Hollywood tripled, moving from 1,700 to 5,100 and 2,550 to 7,650, respectively. By 2020, the total number of available residential units is expected to reach 8,600, while the resident population is anticipated to increase to 12,900.
The recent surge in population has been fueled in large part by the rise of new Class A and B office space and the major companies that have come to the area to fill it. Hollywood also offers some notable infrastructural features that take advantage of the area’s attractions and draw visitors and residents alike. Large mixed-use projects are serving residents who take advantage of Hollywood’s walk-friendly neighborhood, and Hollywood’s two subway stations funnel visitor traffic from other areas of Los Angeles.
Developments underway or recently completed include Kilroy Realty’s Columbia Square and The Academy Project, as well as Hudson Pacific Properties’ Icon Building. Columbia Square, which is built on the site of the legendary Hollywood headquarters for CBS, is a $420-million office, residential, and retail complex at Sunset Boulevard and Gower Street. Viacom has signed a 12-year, 180,000-square-foot lease in Columbia Square for its MTV, Comedy Central, BET, and Spike TV networks. NeueHouse, a New York-based startup that offers extremely high-end, creativity-driven co-working space, will lease 93,000 square feet in the building. Meanwhile, Netflix has signed a 14-year lease of the entire 323,000-square-foot, $200-million Icon Building, which is set to open in the third quarter of 2016. Notably, Hollywood’s total available office space is expected to double by 2020.
Hollywood has also become a hub for post-secondary education in the arts, with 16 post-secondary schools and over 7,500 students. Educational institutions in Hollywood include Emerson College, whose main campus is in Downtown Boston, and Dubspot, the acclaimed school for electronic music production and DJ performance; both campuses opened in 2014. Additionally, the Musician’s Institute is expected to expand in the coming years following more than $47 million in new property acquisitions.
Hollywood Hotel Supply - Past, Present, and Future
Hollywood’s hotel supply has realized major growth alongside the area’s office and residential sectors. According to the Hollywood Property Owner’s Alliance, Hollywood’s rooms supply has increased 29% since 2000. The alliance expects another 29% increase in rooms in the market from 2015 to 2020. Hotel occupancy in the market has improved from 74% in 2000 to 81% in year-to-date 2016, exceeding the average for Los Angeles County by nearly 5%.
The increase in the number of independent and/or boutique hotels is especially notable. Mama Shelter, which opened in June 2015, is representative of the up-and-coming Hollywood boutique hotel culture. The hotel, flagged under a French brand that also operates hotels in France and Brazil, sits in an ideal location near the Hollywood Walk of Fame and other attractions. It also caters to the local culture and the preferences of millennial travelers, with features such as novel furnishings and room décor, as well as a rooftop bar that overlooks Hollywood and Downtown LA.
Many more boutique hotels are in the pipeline for Hollywood, as detailed in the chart below.
Hollywood Hospitality Pipeline Includes 14 Hotels and Mixed-Use Properties
Decades of revitalization efforts, sustained economic strength throughout Los Angeles County, and an expanding corporate base in the market continue to attract hotel investors to Hollywood. With adaptive reuse sites still available and ordinances to help finance construction, continued new construction is expected not only within the hotel industry, but across the residential and office sectors, as well. RevPAR levels in greater Los Angeles are anticipated to remain well above the national average, and while the market is becoming more saturated with branded assets and incoming supply remains a primary concern for local hoteliers, occupancies are expected to remain high. Overall, the trend of strong growth for Hollywood’s hotel industry is forecast to continue in the near future.