L.A.'s soundstages won't be saved by a $4.76 billion summer

Five films with billion-dollar takes and a $4.76 billion summer haul that, adjusted for inflation, ran 26 percent ahead of the summer of 2025 gave Hollywood back some of its cultural pull, and the three titles Commercial Observer credits for it—The Odyssey, Spider-Man: Brand New Day and Obsession—did the pulling. What the summer did not do was fill a soundstage in Los Angeles. The business of selling tickets and the business of shooting films have come apart, and only the second one pays rent.

Commercial Observer's own read is that Hollywood the industry and Hollywood the place have never been more disconnected, and that even a new class of summer blockbusters cannot rescue the hometown business from structural problems that have been accumulating for years. Robert Marich, a film industry analyst and the author of Marketing to Moviegoers, gave the season its correct measure when he said The Odyssey shows the movie equation working—not a new high-water mark, just machinery performing as designed. The detail worth holding onto is that the picture the piece leads with was shot in Los Angeles only in part.

The numbers that actually move production sit underneath the grosses: more than 100 incentives now compete for shoots around the globe, and in 2025, 45 percent of U.S. films and scripted television shows were shot outside the United States. Los Angeles keeps meeting weak studio utilization as productions head for other states and other countries, leaving the local market for film and television work—and the ancillary jobs that hang off it—stagnating.

The mechanism is not mysterious: Los Angeles accumulated an incumbency advantage—crews, stages, vendors, a supplier network deep enough to make shooting here the default—and that advantage is being purchased away, one production at a time, by jurisdictions willing to discount a shoot. When more than 100 programs stand ready to do exactly that, the tenant holds the optionality, and tenant optionality is a rent problem for whoever owns the real estate.

Watch what that does to the ancillary layer: the service businesses and small industrial buildings that fed off steady local production are the part of the ecosystem that turns up in industrial and flex leasing, and their demand is derivative of a shoot calendar that is no longer reliably local. A weak production year would likely not announce itself first through a stage vacancy sign; it would show up as shorter lease terms and thinner renewal rolls a few blocks away.

California has already spent on the theory that subsidies reverse the flow, expanding its Film & Television Tax Credit Program to $750 million a year through June 2030—more than doubling the previous $330 million allocation. The arms race did not stop there: new and larger programs keep getting proposed, with candidates for local and state office competing to promise more, and in August President Donald Trump floated a nationwide sweetener that has pushed Congress to draft a bill carrying another 20 percent federal credit.

Michael Thom, who teaches public policy at the University of Southern California's Price School, argues that the industry and its subsidy supporters keep reaching for the same strategy while expecting a different result, and that employment in film and television does not correspond to taxpayer money. That is an argument about jobs, but for real estate it cuts one way: an incentive can move a shoot across a state line, or an ocean, and it cannot fill a stage by itself. A credit is a line item in a location decision, not a demand curve.

There is a reading of all this that favors California landlords, given that the state's credit is now more than double its previous allocation. The counter is that the expansion is being matched and proposed elsewhere, and a subsidy every jurisdiction offers tends to get priced into the production's deal rather than the landlord's rent. The credit changes who pays for the shoot; it does not change how many shoots there are to compete for.

The only production category moving up is digital production: FilmLA, L.A.'s film permitting office, reported that shoot days for new digital production jumped 47 percent in the second quarter as studios in Burbank and elsewhere booked more online creators. Commercial Observer is direct that the gain is not growing fast enough to offset the losses elsewhere, and the shortfall is what should set pricing on production assets, which raises the question a rent roll will eventually answer: whether creator bookings carry the same rate and the same duration as scripted production. If they do not, an occupancy recovery built on them underwrites differently than one built on features.

The temptation is to read a summer like this one as a leading indicator for soundstages, but it runs closer to the reverse: the films behind the $4.76 billion were shot elsewhere, in jurisdictions offering a better net cost, so what a stage owner or a lender is genuinely underwriting is shoot-day counts, utilization and the location calculus that produces both. Ticket revenue is a content variable; occupancy is a real estate one, and this summer showed how little the first says about the second.

This publication has argued that office has already split into two markets, with trophy assets releveraging at premiums while obsolete commodity stock gets converted, and production space looks likely to run the same course; the difference is basis: a stage has more plausible alternative uses than a tower, which suggests a softer floor but also a lower ceiling. The lots with entitlements, a diversified tenant base and an owner who can hold through a soft cycle should defend their pricing, while single-purpose space in a soft submarket is where the repricing happens and where the conversion math starts. Capital that keeps moving into Los Angeles, meanwhile, has been chasing anchors that don't depend on a slate—Landmark's 1,261-bed USC community, its second ground-up delivery in the city and the third property in its portfolio around that campus, is a bet on a university's enrollment rather than a production calendar.

Two things would change the picture, and neither appears in a box office report: one is more quarters of creator-driven shoot days, enough to move the aggregate permitting numbers rather than a single line inside them; the other is what Congress does with the 20 percent federal credit, which would reset the net cost of shooting in the United States rather than shifting productions between states. Until one of them lands, the stages here will be priced off shoot-day counts.