Report: Increasing Demand for Video Games has Major Impact on Southern California’s CRE Industry

CBRE, Los Angeles, Orange County, Riot Games, Activision Blizzard, Electronic Arts, Sony Interactive Entertainment, League of Legends, Call of Duty, World of Warcraft, Jam City, Belong Gaming Arenas, Santa Monica, Playa Vista, Culver City, El Segundo, Burbank, Irvine

By Catherine Sweeney 

Over the past 40 years, video gaming has become a major source of entertainment among consumers. With much of its growth located in the Greater Los Angeles and Orange County region, the sector has created an increased demand for commercial real estate in southern california, according to a report from CBRE. 

The report, titled “The Rise of Video Games & eSports in Greater LA and Orange County,” states that the video game and eSports industries have grown exponentially across the globe, with approximately 2.7 billion people, or 35 percent, of the total population playing video games as of most recent data in 2020. In 2020, global video game revenue reached $174.9 billion, a 20 percent increase since the previous year. North America makes up for 26 percent of the total global revenue, with a reported $44.7 billion generated in 2020 alone. 

“The growing popularity of gaming and eSports has been felt nationwide regarding the consumption of their product and the impact on commercial real estate. That said, Los Angeles  and Orange County have felt this impact in a substantial way, particularly in the West Los Angeles market, as industry-leading firms such as Riot Games, Activision Blizzard, Electronic Arts and Sony Interactive Entertainment have all leased larger spaces here or upgraded facilities in the last few years. This is a trend we expect to continue,” CBRE Senior Vice President Patrick Amos said. 

The report showed that tech and media companies occupy approximately 22.6 million square feet of office space in Greater Los Angeles and Orange County. Approximately 3.1 million square feet of this space, or 14 percent, is used by video game developers and publishers. While relatively small compared to a global scale, CBRE estimates the gaming and esports footprint has grown 68 percent in the past five years. 

The growth in eSports has played a major part in this, with 86,000 square feet of office space occupied by eSports organizations in Greater Los Angeles and Orange County since 2019. Further, the report showed new developments have come about as a result of this growth, with the concept of eSports arenas. According to the report, venues, like the 15,000 square-foot  Esports Arena in Santa Ana, provide consumers with onsite computer equipment to play while also providing space for audience members to view eSports games. 

“While the major publishers have long had a major presence of office space in the Los Angeles and Orange County region, the increased popularity of gaming and eSports has led to a new wave of demand focused on facilities for eSports teams and a growing demand for arena space as well,” Amos said. 

Space is primarily taken up by several large companies in the region, including League of Legends creator, Riot Games, which occupies 778,000 square feet. Activision Blizzard, which created Call of Duty and World of Warcraft, also occupies 750,00 square feet in the region. According to the report, the two companies are among the top five video game developers in the world, with approximately $1.7 billion and $8.1 billion in revenue, respectively, in 2020.

Other occupiers include Sony Interactive Entertainment, Electronic Arts, Insomniac Games and Jam City, according to Amos. In total, CBRE reports 142 video game developers and publishers are taking up space in the region as of 2020. 

“As an industry specifically driven by the marriage of both technology and entertainment, the Los Angeles and Orange County region has unique access to an unparalleled, highly-skilled labor force in both fields,” Amos said. 

“To this point, the regional submarkets that have seen the most benefit from the expansion of gaming and eSports are West Los Angeles – specifically Santa Monica, Playa Vista and Culver City – as well as El Segundo, Burbank and Irvine.”  

According to the report, growth in these regions is only expected to continue, with e-commerce competition causing several malls to fill vacated spaces with eSports entertainment venues. For instance, U.K.-based Belong Gaming Arenas announced plans to open more than 500 locations in malls and shopping centers across the U.S. starting in 2021. 

“As the consumption habits of the population continue to evolve, we are likely at the early stages of major growth as it relates to gaming and eSports. We believe this sector is currently where streaming services were prior to their major breakthrough roughly five years ago. Hence, we expect to see a boom in the commercial real estate footprints of gaming and eSports in a similar manner over the next several years,” Amos said.