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Los Angeles Times

 

Warner Music leaving Burbank, Westside for downtown L.A.’s Arts District

By Paresh Dave

Already a growing haven for artists, fashionistas, foodies and techies, the Arts District is about to get a major influx of song and dance.

In a shift that reflects the increasing importance of infusing the music industry with tech culture, Warner Music Group plans to move hundreds of employees from Burbank and the Westside into a renovated former auto plant in the downtown neighborhood.

The Arts District has witnessed a flood of new residences, shops and restaurants — and the development of a nascent start-up scene. But the move of the company’s West Coast headquarters into the historic Ford Factory building is a watershed moment, said Carl Muhlstein, international director at real estate brokerage Jones Lang LaSalle.

“After years of courting tech and media, downtown has finally snagged a whopper,” said Muhlstein, who was not involved in the deal. “Downtown has been rehearsing for this part for close to 10 years, and Warner Music took them up on it.”

Los Angeles’ music industry has been confined mostly to Hollywood and the Westside, with Universal Music Group anchored in Santa Monica and Sony Music in Beverly Hills and Culver City. 

Warner Music, whose existing leases were expiring in the coming years, considered Culver City, Santa Monica and other neighborhoods, according a person familiar with the matter not authorized to publicly comment. But it decided it wanted an entire building it could make its own.

The Ford building, at 777 S. Santa Fe Ave., fit the bill. Constructed in 1912 by Ford Motor Co. to assemble Model T’s and other cars, it later housed U.S. Rubber, Lockheed Aircraft and Imperial Toy Co.

San Francisco real estate investor Shorenstein Properties acquired the 4-acre industrial complex in 2014 for $37 million with plans to turn it into creative offices with ground-floor shops, according to CoStar Group.

Warner Music leased the 257,000-square-foot building for 13 years for about $10 million annually, with an option for an additional 10 years, according to a regulatory filing. The lease starts in August and the company plans to move in 2018.

Online publisher BuzzFeed and some technology companies toured the Ford building too, sources said last year. Negotiations with BuzzFeed reached advanced stages before the New York company backed out, opting for space in Hollywood. 

The world’s third-largest music company plans to build offices, recording studios, performance spaces, a cantina and artists’ lounges. It envisions a large outdoor space leading to a 750-vehicle parking garage. Warner Music said it would spend $40 million to $50 million to complete the structure to its liking, the regulatory filing said.

Warner Music Chief Executive Steve Cooper told employees by email Friday that the Arts District “is a burgeoning art, fashion and food scene that’s a magnet for businesses, entrepreneurs, and creatives.”

“Above all, we wanted an exciting space that enables us to preserve our unique company cultures, while promoting greater collaboration across divisions,” Cooper wrote. The Ford Factory “will be given a dramatic new life, preserving its architectural character while bringing it fully into the 21st century.”

Architect David Rockwell, known for his efforts on Nobu restaurants and Hollywood’s Dolby Theatre, has been hired to work on the project, the source said.

The consolidation of the firm’s West Coast operations follows a similar move two years ago in New York, where the company has its official headquarters. The firm, whose talent roster includes Beyonce, Coldplay, Flo Rida and Sheryl Crow, found that consolidating offices on Broadway nears Times Square boosted productivity and creativity, according to the source familiar with the deal. 

Warner Music, which has long had offices on the lot of Warner Bros. Studio — a separate company — and leases a large building in Burbank’s Media District, hopes to foster relationships with up-and-coming artists and songwriters drawn to the Arts District.

Like others in the music industry, Warner Music has been hit with a decline in music downloads as consumers have shifted to streaming services. The privately held company, controlled by billionaire investor Len Blavatnik’s Access Industries, recorded just a $33-million profit in the nine months ended June 30, but that was better than its $65-million loss for the same period last year.

In moving to the Arts District, the company decided on a neighborhood undergoing huge changes. Real estate firm CBRE estimates 2 million square feet of office space is under construction in the district, already a fast-growing hub for media and tech that has lured businesses such as venture capital firm Greycroft Partners and crafts-selling start-up Seedling. 

Transportation start-up Hyperloop One, which is seeking to build high-speed transit tubes worldwide, has an expanding campus of more than 55,000 square feet a few blocks from the Ford building.

Other development envisioned in coming years could make the area more of a residential community.

Last month, Irvine-based SunCal announced plans to erect two 58-story condo and apartment towers at 6th and Alameda streets. The mixed-used project, also featuring hotels and creative offices, would dominate the skyline in the largely low-rise area.