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The B.C. Film Industry and
Industrial Real Estate
Northshore Studios, North Vancouver
1
The B.C. Film
Industry and
Industrial Real Estate
Introduction
The lm and television industry is not often considered a typical
industrial real estate user; however, it is an industry that now
occupies a signicant amount of such space in Metro Vancouver.
This Spark Report will provide an overview of the British Columbia
lm and television industry, and outline this industry’s impact on
the industrial real estate market in Metro Vancouver. Firstly, we
will examine the ideal building specications for lm and television
productions, followed by a discussion on the impact of the
industry on the Metro Vancouver market. Secondly, we’ll provide
a summary of the two primary types of users of industrial real
estate from the lm and television industry. Thirdlly, the industry’s
production gures ($) over the past ten years are detailed. Lastly,
factors impacting the lm and television industry’s demand for
industrial real estate in B.C. will be summarized, with three main
factors outlined: (1) tax incentives, (2) the Canadian (CAD) to US
Dollar (USD) exchange rate and (3) the “Netix Eect”.
This paper will conclude that the high degree of exibility with
respect to production location in combination with the typical short-
term lease requirement (six months or less), may cause the overall
demand for industrial space in the Metro Vancouver area from
this segment to change quickly. However, given the signicant
amounts of investment in human and physical infrastructure in
the local lm and television industry, in combination with the B.C.
government’s agility around tax incentives, if there is a change to an
external factor impacting lm and television productions, demand
for industrial space is likely to remain strong in the short to medium
term.
2Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada
Ideal Film Production
Building Specications
The ideal lm production building has the following characteristics:
• Minimum 24’ clear ceiling height (the higher, the better)
• Minimum 30’ x 30’ column spacing (less columns or clear span preferred)
• Ample existing oce areas or ability to expand oce areas
• Ample parking whether in a parking lot or loading court for regular vehicles and trailers
• Fibre optic internet connection or similar
• Soundproof building construction or ability to soundproof
• Building footprint to allow exible demising congurations; each sound stage will typically be between 10,000 – 30,000 SF
• Proximity to downtown (Some actor
contracts require the studio to be within
a certain driving time)
Location Considerations:
• Noise considerations – not below ight
path, or adjacent to a hospital, police
station or re hall with consistent sirens
• Proximity to transit or SkyTrain a
positive
As of Q1 2017, the industrial vacancy rate for Metro Vancouver was 2.2%, up from 1.7% in Q1 2016 (over the past ten years the average
vacancy rate was 2.9%, the median vacancy rate was 3.3%, the lowest vacancy rate was 1.1% and the highest vacancy rate was 4.8%).
The very strong demand coming from the lm and television industry is only exacerbating the lack of available industrial space. However,
the total amount of studio space in Metro Vancouver is, in reality, not a signicant amount of the total inventory (1.1% of the total inventory
as of Q1 2017) and is even less signicant further from the downtown core. That said, industry watchers claim that the demand from the
lm and television industry will likely continue as long as the USD to CAD dollar exchange rate is favorable for U.S. production companies.
Even if the USD to CAD dollar exchange rate were to become less favourable, the B.C. government has been and continues to oer very
attractive tax incentives that could be adjusted to oset a less favourable exchange rate. This is positive news for the B.C. economy as the
lm industry provides a large number of jobs both directly and indirectly, and is a relatively environmentally clean industry.
Overall, the amount of studio space in Vancouver and Burnaby is a small percentage of their total industrial inventories. As of Q1 2017
Vancouver’s total industrial inventory is 20,032,767 SF and Burnaby’s total industrial inventory is 25,821,746 SF. However, studio space
does not account for the full amount of industrial space associated with the lm and television industry. Additional demand comes from
production companies that lease short-term industrial space in buildings that are not purpose built and have not been converted to studio
space. As such, the total amount of industrial space being utilized by the lm and television industry is greater than the 2,196,995 SF of
studio space noted by Creative B.C. Unfortunately, this amount is not accurately tracked as it uctuates substantially.
3
55,300
239,676
265,822
64,800
247,800
44,544
31,360 41,326
838,491
178,336 189,540
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
DeltaBurnaby LangleyMaple RidgeNorth VancouverVancouver Coquitlam
Total Studio Area (SF)
Conversion Outside Zone Purpose Built
The Impact of the Film and Television
Industry on Industrial Real Estate
Creative B.C. maintains information on active studios operating in B.C. and categorizes them into purpose-built, conversion or outside
zone (outside zone refers to the location being outside the designated area that qualies for tax incentives). From Creative B.C.’s list,
the amount of studio space in Metro Vancouver totals to 2,196,995 SF as of April 2017. Of the total amount of studio space in Metro
Vancouver, 1,078,167 SF or 48% is in Burnaby, with 838,491 SF being purpose built, and the remaining being conversion studio space. The
second largest amount of studio space by municipality is in Vancouver, at 437,340 SF or 19.5% of the total studio space. 189,540 SF of
Vancouver’s total studio space is purpose built and 247,800 SF is conversion studio space.
Source: Creative B.C.
Studio Space by Type and Municipality
e Crossing Studios – 8355 Riverbend Court, Burnaby, BC
4Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada
Film Studios, Production Companies and
Industrial Real Estate
There are two main types of users of industrial real estate
associated with the lm and television industry. The rst, lm and
television studios (hereafter referred to as “studios”), may lease
or own industrial real estate. The second are lm and television
production companies (hereafter referred to as “production
companies”), which lease industrial real estate, usually from
studios, but sometimes directly from landlords. Studios are
typically local companies and hold industrial real estate with
the intent to license the space to production companies while
providing a host of additional industry specic services. Some
of the studios currently operating in Metro Vancouver include
The Crossing Studios, Vancouver Film Studios, Canadian Motion
Picture Park, Bridge Studios, North Shore and Mammoth Studios.
The older, more established studios tend to own their facilities
instead of leasing them, such as Vancouver Film Studios, Bridge
Studios, North Shore and Mammoth Studios; these companies
have well-capitalized parent companies including The McLean
Group, Larco Investments Ltd. and Bosa Development Corporation.
In contrast, the newer, but perhaps more entrepreneurial and fast-
moving studios tend to lease their facilities. It is the newer studios
like The Crossing Studios that are able to accommodate current
demand because the traditional studios are at capacity.
Production companies can be local or foreign, but are typically
from Southern California and around Los Angeles. Some
examples of production companies include Paramount Pictures,
Warner Brothers, Nickelodeon, Lifetime, Fox, N.B.C. and Alcon
Entertainment. Studios are able to provide several services to a
production company that help make a facility “move-in ready” on a
short time frame including furniture, IT set-up, property and facility
management services (typically far faster than a normal Landlord
would provide), lighting, soundproong and demising, among
other things. The speed at which these kinds of services can be
provided to production companies is of utmost importance since
the lm industry works at an exceptionally fast pace. A production
company will often pay a premium to lease space through a studio
because they can occupy a property for only the period of time
they require it, secure consecutive short-term options to renew,
occupy a facility fully furnished with no maintenance, and have a
team of sta on-hand to immediately deal with any issues with IT,
services, or the facility.
5
Total Volume of Film and Television Production in Canada by Province and Territory
Share of total ($ millions) 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Ontario , , , , , , , , , ,
British Columbia , , ,. , , , , , , ,
Quebec , , , , , , , , , ,
Alberta
Nova Scotia
Manitoba
Newfoundland and Labrador
Saskatchewan
New Brunswick
Territories*
Prince Edward Island
Total 5,001 5,367 5,120 5,014 5,560 5,963 5,830 5,956 6,949 6,761
Source: Prole 2016: Economic Report on e Screen-Based Media Production Industry in Canada for production volume data (http://cmpa.ca/industry-information/prole)
Although Ontario has a 21.7% greater volume of lm and television production relative to British Columbia, Ontario’s real GDP for 2015
was 94.0% greater than B.C.’s. As such, lm and television production comprise a signicantly greater share of real GDP for B.C. relative
to Ontario. In addition, the Greater Toronto Area (GTA)’s total industrial market inventory is 307% greater in size (SF) relative to Metro
Vancouver’s industrial market inventory as of Q4 2016. Thus, Metro Vancouver has a greater ratio of lm and television production volume
($) to industrial inventory (SF) in comparison to the GTA.
B.C.’s Film and
Television Industry
Production Volume -
2006/07 to 2015/16
The following chart indicates each province and territory’s total
lm and television production by dollar volume ($ millions). For
2015/16, Ontario has the greatest dollar volume of lm and
television production totaling to $2,618,000,000; British Columbia
trails Ontario with the second greatest amount of lm and
television production volume at $2,151,000,000.
6Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada
Looking more closely at the historical data of lm and television
production for both Ontario and British Columbia (see graph
above) there is a clear upward spike in the total dollar volume in
production from 2013/14 to 2014/15 for both provinces. However,
B.C. experienced a relatively sharper increase in production (41.1%
growth year-over-year) compared to Ontario (12.5% year-over-
year growth) for 2014/15 despite both provinces setting all-time
records in total dollar volume in production. The three main
contributing factors for B.C. and Ontario’s record setting year are:
(1) the US Dollar (USD) to Canadian Dollar (CAD) exchange rate,
(2) the “Netix Eect” and (3) the tax incentive programs available
to lm and television productions in Metro Vancouver. One factor
that may explain the divergence in year-over-year growth between
Ontario and British Columbia for 2014/15 is that Ontario reduced
its Ontario Production Services Tax Credit (OPSTC) from 25%
to 21.5%, eective after April 23, 2015. Although this data is
for economic activity from April 1, 2014 to March 31, 2015, there
may have been a reaction prior to the announcement due to
anticipation of a reduction in tax incentives. The OPSTC applied
to both foreign and domestic production expenditures; in contrast,
B.C. did not have a reduction in tax incentives over this period.1
1Ontario Budget 2015, www.ontario.ca/budget
Total Volume of Film and Television Production: Ontario and British Columbuia
Source:
Prole 2016: Economic Report on e Screen-Based Media Production Industry in Canada for production volume data (http://cmpa.ca/industry-information/prole)
1,792
1,961 1,903
1,910
2,077
2,586
2,439 2,409
2,711
2,618
1,392
1,683
1,329 1399
1,729
1,578 1,597 1,608
2,269
2,151
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
$ millions
Ontario British Columbia
White Rock, BC - Location of Once Upon a Time
7
Why Tax Incentives?
Film and television productions are typically highly mobile and are
often very exible with respect to their lming location. Given
that the lm and television industry is ultimately a prot-driven
business, whichever region oers the best overall value (taking
into account cost, local talent, lming locations, and existing
lm infrastructure) will win the business. A signicant part
of the equation of oering the best value to lm and television
productions comes from tax incentives, which reduce the overall
cost to the bottom line of a production. This process of trying
to court lm and television productions is highly competitive.
Traditionally, this competition has been between Hollywood and
“Hollywood North” given the similar time zones and the relatively
close distance of Vancouver to Los Angeles. However, the last
ten to fteen years has seen competition become rampant within
Canada, within the United States, as well as between the United
States and Canada.
2 British Columbia Ministry of Finance, Budget and Fiscal Plan 2016/17 – 2018/19, (February 16, 2016).
3 “Tax Credit Changes and Transitional Provisions.” Creative BC. N.p., n.d. Web. 23 Mar. 2017.
8Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada
Volume of Film and Television Production in BC ($ Millions) vs
Value of U.S. to Canadian Dollar (Avg. Annual Exchange Rates)
Source: http://www.canadianforex.ca/ for exchange rates and Prole 2016: Economic Report on e Screen-Based Media Production
Industry in Canada for production volume data (http://cmpa.ca/industry-information/prole)
$861
$1,174
$900
$1,092
$1,364
$1,102 $1,076 $1,080
$1,672
$1,574
1.10
1.03
1.13
1.09
1.02 0.99 1.00
1.05
1.14
1.30
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
USD to CAD exchange
$ Millions
Volume of Film and Television Prd'n in BC ($ Millions) US to Canadian Dollar (Average)
As a result, the cost of B.C.’s lm and television tax credits are increasing and were projected to total to $493 million for 2015/164.
Given the signicant rise in the amount of lm tax credit costs incurred, the B.C. government decided to consult with the B.C. lm and
television industry on changing the tax incentive rates. Ultimately, consultations with the B.C. lm and television industry have led the
B.C. government to reduce its tax incentives for productions with a date of principal photography that is on or after October 1, 2016. The
B.C. government reasoned that demand for lm and television productions to locate in B.C. remains very high due to the favourable CAD
to USD exchange rate, experienced local skilled labour, a similar time zone to Los Angeles, moderate weather and sizeable existing lm
infrastructure. Thus, it is not anticipated that the change in the tax incentives will deter demand to the point of losing potential revenue that
would have been otherwise generated with the higher tax incentives.
British Columbia’s lm and television tax credits are labour-based credits, meaning the tax credit rate applies specically to a production’s
British Columbia labour costs, which eectively reduces these costs. Provincial tax credits for lm and television productions in B.C.
averaged approximately $255 million per year over the period of 2010/11 to 2013/14 when the Canadian and US dollar were near parity.
However, with the recent weakening of the Canadian dollar, foreign production activity has increased by over 46% from approximately
$1.08 billion in 2013/14 to $1.574 billion in 2015/16.
The US Dollar to Canadian Dollar Exchange
Rate and Recent Changes to Tax Incentives
4 British Columbia Ministry of Finance, Budget and Fiscal Plan 2016/17 – 2018/19, (February 16, 2016).
9
Source: British Columbia Ministry of Finance, Budget and Fiscal Plan
2016/17 – 2018/19, (February 16, 2016).
Chart 1: Exchange Rate and Film Tax Credit Costs
Chart 2: Breakdown of Cost Advantage
US cents/Canadian $
2010/11 to 2013/14 2014/15 2015/16
Film tax credits (millions)
100
80
60
40
20
0
$500
$493
$343
$255
98.8
90.5
$400
$300
$200
$100
$0
78.2
*Note: For 2015/16 the total lm tax credits were estimated to
be $493 (millions) by the B.C. Government in their 2015/16 –
2018/19 Budget and Fiscal Plan. However, the actual cost of
the lm tax credits (millions) ended up being $491 (millions) for
2015/16 according to B.C.’s Budget and Fiscal Plan 2017/18 –
2019/20.
*”Current” is before May 2, 2016 changes to incentives
Foreign Production Spending $100 on BC Labour
Average 2010-2014 Current
$100
$80
$60
$40
$20
$0
Exchange Rate
Tax Credits Tax Credits
Exchange Rate
Net Cost to
Producer
(US$)
Net Cost to
Producer
(US$)
Exchange rates are the average for calendar years. The exchange rate for 2010/11 to
2013/14 is the average of calendar years 2010 to 2013. For 2010/11 to 2013/14 the
lm tax credit cost is the average from the Public Accounts for 2010/11 to 2013/14.
10 Spark Report: The B.C. Film Industry and Industrial Real Estate | Colliers International Canada
The “Netix Eect”
Another substantial driver of the lm and television industry’s demand for industrial real estate is due to the “Netix Eect”. The “Netix
Eect” refers to the proliferation of original streaming content in order to capture market share between the dierent streaming delivery
providers, such as Netix, Hulu, Amazon Prime Video and CraveTV. In 2016, Netix spent approximately $5 billion on content and is
planning to invest over $6 billion in 2017 on a prot and loss basis.5 Amazon Prime Video’s content budget for 2016 was estimated to be
between $4 billion and $5 billion, but the cost of their planned international expansion to nearly 200 countries could drive the gure up
another $1 billion to $2 billion in 2017.6 This proliferation in spending for content, some of which is original content and some of which is
for content acquisition, has caused a substantial increase in demand for industrial buildings suitable for these productions, bolstering the
overall demand for industrial space.
Although the exact percentage of each streaming provider’s budget that is allocated to producing original content has not been disclosed,
Netix has said, “Given the success we’ve had with our original series, we are increasing our investment in this area and we expect the %
of our content spend on original series to increase over time. This increased investment generally replaces spend on other content deals,
although our overall content spend is expected to increase in absolute dollar terms”.8 Netix produced about 600 hours of original content
in 2016 and plans to produce 1,000 hours of original programming in 2017.9
Global P & L Content Expense
Source: Company data, Morgan Stanley Research
5Speculations, Great. “Original Programming Can Be Netflix’s Key Competitive Edge In 2017.” Forbes. Forbes Magazine, 29 Dec. 2016. Web. 23 Mar. 2017.
6Munson, Ben. “Amazon Prime Video Viewers in 2016 Watched Twice as Many Hours as during 2015.” FierceCable. N.p., 03 Feb. 2017. Web. 23 Mar. 2017.
7Speculations, Great. “Original Programming Can Be Netix’s Key Competitive Edge In 2017.” Forbes. Forbes Magazine, 29 Dec. 2016. Web. 23 Mar. 2017.
8 ”Top Investor Questions” section on Netlx’s website - https://ir.netix.com/faq.cfm#Question31069
9”Netix Announces 1,000 Hours of New Original Content For 2017.” VentureBeat. N.p., n.d. Web. 23 Mar. 2017.
2012
Netix Amazon Hulu
2013 2014 2015 2016E
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
$, Billions
11
Exhibit 1-6 Adoption rates for alternative video technologies and services. English language market
Source:Prole 2016: Economic Report on e Screen-Based Media Production Industry in Canada (http://cmpa.ca/industry-information/prole)
50
60
40
30
20
10
10
13
18
23
35
43
46 50
49
57
51
44
38
34
31
30
22
12
21
29
39
47
22
16
13
14
12
12
7
6
3
4
2
1
0
2007
Share of total populations 18+ (%)
2008 2009 2010 2011 2012 2013 2014 2015
Watch TV Programming
on the internet*
Watch TV Programming
on smartphone*
Watch TV Programming
on a tablet device*
Personal video recorder**
Netix
Copyright © 2017 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable eort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material contained in this report.
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Primary Authors:
Curtis Scott
Manager, Market Intelligence | Western Canada
+1 604 662 2667
curtis.scott@colliers.com
Scott Sutherland
Market Intelligence Coordinator | Vancouver
+1 604 692 1492
scott.sutherland@colliers.com
Contributors:
Andrew Lord | Senior Vice President
Roy Pat (白松恩) | Associate
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