Pacoima-based Line 204 hopes to break ground on a new 240,000-square-foot soundstage complex in Sun Valley in mid-2018, but before the studio and production rental company can move forward on the project it needs to clear another hurdle. A group of residents living near the vacant 10-acre site on Peoria Street sued the city of Los Angeles and Line 204 in 2015 to block the development, questioning whether the city violated the California Environmental Quality Act in approving the project. The Superior Court in Los Angeles ruled in favor of the city and Line 204 in late 2016, but residents appealed. The company expects the appeal to be heard in early 2018. “I’m confident in this project,” said Line 204 Chief Executive Alton Butler, adding that there is limited soundstage space in Los Angeles and he’s working with designers and builders to ensure the complex is state-of-the-art and addresses neighbor’s concerns. Line 204’s Vision Butler founded Line 204 out of his Studio City garage in 1997. The company now operates 40,000 square feet of studio facilities and 10,000 square feet of production office space in Hollywood, and a production equipment rental facility in Pacoima. Butler began pursuing the Sun Valley project in 2015 because demand for high-quality soundstages was increasing and it was too expensive to build a large new facility in Hollywood. The design calls for one 128,000-square-foot studio, another 95,000-square-foot studio, storage facilities and landscaped grounds. It’s intended for use by television and motion picture production companies. Butler said Hollywood is very expensive, and the cost factor coupled with the limited supply of suitable industrial property have pushed many entertainment industry support companies out of that area, making the Sun Valley location a good option. But a number of local residents opposed the Sun Valley project early on, saying the production complex is out of scale and incompatible with the immediately adjacent single-story, single-family, equine-oriented residential community, according to a Los Angeles City Council agenda dated Aug. 14, 2015. The Los Angeles Planning Commission approved Butler’s plan in April 2015, and residents appealed. The Planning and Land Use Management Committee then approved it in July 2015, and the Los Angeles City Council went on to approve it in August 2015. Following the City Council decision, residents filed suit. A judge ruled in favor of the City and Line 204 in November 2016, and awarded $4,310 in costs, according to court filings. Residents have appealed the decision, leading to the anticipated court date in early 2018. Demand for soundstages If Line 204’s Sun Valley project moves forward, it could, indeed, meet a growing demand for high-quality soundstages in the Los Angeles area. “Based on what we’ve been able to determine, 12 of the largest studios in the Los Angeles area had a 96 percent average occupancy rate in 2016,” said Philip Sokoloski, vice president of Integrated Communications at FilmL.A., the official film office for the City and County of Los Angeles. “This illustrates the need for adding more soundstage space to absorb additional production,” Sokoloski added. The 12 studios operate 70 percent of the approximately 334 certified soundstages available for film production in the Los Angeles region, according to FilmL.A.’s Sound Stage Production Report released on Nov. 30. In 2016, a total of 1,089 projects were filmed at these studios, including 236 commercial projects, 185 one-hour TV series, 169 half-hour series, 81 feature films, 61 talk shows, 38 still photography projects and 37 pilots, according to the report. There were 264 “other” projects filmed during the same period. “2016 was a busy year for local soundstages,” said Sokoloski. “(The studios in the report) had 3.3 million square feet of production space that was kept in near continuous use.” California’s Film & Television Tax Credit Program 2.0 is helping fuel an increase in film production in Los Angeles and California. In late 2014, the program increased its available incentive sum from $100 million to $300 million annually and extended eligibility to more projects. The move is an effort to limit runaway production, where companies leave California to shoot in states that offer better tax incentives. Production of online, on-demand and streaming content is also increasing demand for studio space. And Line 204 isn’t the only company looking to expand its soundstage footprint. NBCUniversal completed a new 18,000-square-foot soundstage in late 2016, and is working on an additional complex called Area 71, according to the FilmL.A. report. Paramount Studios plans to overhaul its lot. Warner Bros. also broke ground this year on a new 18,040-square-foot soundstage in Burbank, among other area projects. “One of the main choices for where projects choose to shoot is availability,” said FilmL.A.’s Sokoloski, adding that if a studio can meet a project’s needs and has the open space, most companies are willing to use it even if it’s outside of Hollywood and other production hotspots. Butler said he’s constantly polling people in the entertainment industry about what they’re looking for in studio and soundstage space. While the lawsuit has slowed the Sun Valley project, he says it has also given him time to make sure the facility design and equipment will be of the highest quality. He recently hired Tustin-based Bastien and Associates Inc. as architect on the project. The firm has worked on a variety of film, television and broadcast studios, as well as other entertainment projects, locally and internationally. Sun Valley context The commercial real estate market in Hollywood – especially for industrial – is very tight, said Dave Harding, senior vice president with brokerage CBRE Inc., and many properties are being snatched up for multifamily, retail, office and mixed-use development. “There are a lot of entertainment companies up in Sun Valley,” said Harding, adding while the community is different than Hollywood, its close proximity to the Burbank film industry and 5 freeway are major selling points. But this doesn’t mean industrial real estate in Sun Valley is cheap. The average asking lease rate is 91 cents a square foot, which makes it the fifth most expensive industrial market in the Greater San Fernando Valley, according to CBRE research. The other four most expensive industrial markets in the area include Van Nuys (95 cents a square foot), Calabasas ($1.12), Woodland Hills ($1.13) and Burbank ($1.41). The average rate for the Greater San Fernando Valley region is 82 cents a square foot. In comparison, the average industrial rate in Los Angeles is $1.03, with prime areas and properties fetching considerably higher prices. There’s also more available industrial space in Sun Valley, which had a 0.9 percent overall vacancy rate in the third quarter, compared to 0.4 percent in Los Angeles, according to CBRE. Increased demand and limited supply are expected to push industrial lease rates higher over the next year, CBRE predicts, and there’s very little new industrial construction happening in the L.A. region. This could all be good news for Line 204. However, Butler acknowledges if the Sun Valley project is allowed to move forward, he still needs to grow the business one step at a time. “It’s going to take time for business to come out here,” said Butler, but he believes companies will make the trip once they see the site.