Amid production slowdown, Atlanta soundstage pioneers look to pull back
John Raulet well remembers the days before Hollywood’s land rush for Atlanta real estate.
Before production campuses like Doraville’s Assembly Studios or Fayetteville’s Trilith Studios sprouted across Georgia, film and TV productions rented vacant grocery stores and warehouses — often anything they could find with four walls and a roof — to shoot indoors.
Transforming these properties is how Raulet and his partners went from real estate brokers to being the operator of soundstages in the early days of Georgia’s supercharged film tax credit, which brought a parade of projects like “The Walking Dead and “The Hunger Games” to the Peach State.
Raulet Property Partners was one of the first groups to get into the soundstage business in Georgia. Now, as a downturn in film production presents challenges for operators across the state, they’re one of the first to pull back.
After more than a decade of operating stages in Atlanta, the firm has sold one stage, entered under contract to sell another and converted two back to warehouses to lease to industrial users. Only one of their properties will remain as a soundstage: Mailing Avenue Stageworks near Chosewood Park, where 2014 science fiction blockbuster “Divergent” was filmed. But they’re open to transforming this property, too, if another user has a vision for it.
Raulet doesn’t want to exit the film industry entirely, but it’s time to move forward after waiting two years for production to rebound. Their properties are in prime spots, with two along future pathways for the Atlanta Beltline. Industrial users will give them more than double what productions are willing to pay to occupy the same space.
“I’ve spent 17 years doing this,” Raulet said. “To make an analogy: we’re sitting at a blackjack table, and the dealer just got 21 seven times in a row. And we’re going to take our chips and go hang out somewhere else until we get a new deck. Because sitting at this table doesn’t make sense.”
Georgia launched its tax credit in 2005 and expanded it in 2008, setting off a wave of production that made the state one of the top production locations outside Los Angeles or New York.
Spending by production companies peaked at $4.4 billion in 2022. This past fiscal year, productions in Georgia spent $2.6 billion, down 37% from the previous year. Excluding 2020, when production stopped for months because of the pandemic, fiscal year 2024 is the weakest year the state has seen since fiscal year 2016.
Georgia’s film industry built studios to accommodate a $5 billion industry, Raulet said. Now, it’s a $2 billion industry.
As a broker, Raulet has represented clients in other conversion pursuits, too. Paulding County’s two-stage film studio is under contract with an industrial user. Atlanta Filmworks near Chamblee, which previously was leased to cable network AMC for more than five years, will soon be the home of an indoor children’s adventure park, which just received its certificate of occupancy. He is also representing a studio for sale at 1271 Tacoma Drive in west Midtown, which served as a film facility for eight years before the tenant moved back to California.
Production in Georgia surged shortly after the pandemic, fueled by new streaming services aiming to fill their libraries, new original films and television series, as well as studios such as Marvel green-lighting tentpole movies designed to make a lot of money. The pace of production began to slow shortly before the 2023 dual Hollywood strikes, a period when union projects ceased entirely, and never returned to the same level.
Now, production has increasingly shifted overseas, as the costs of union labor rose significantly. Studios are also chasing more generous incentives offered by other countries.
To land productions, stages in the U.S. are offering rental rates far below what they were years ago. In some cases, they’re less than half.
States have begun to beef up their production incentives to remain competitive, aligning them much more closely with Georgia’s own. California raised the cap on its incentive from $330 million annually to $750 million, and in July, its film commission saw a 400% spike in applications for tax credits, according to Variety.
This is not good for Georgia, observers say. If stages in Los Angeles are offering discounted rates, and California is awarding projects incentives, there is a better chance a production’s accountant will make the case to keep it in state. By staying in California, producers don’t have to pay transportation and housing costs for their top-line talent or crew, who usually do not live in Georgia.
Building a business model on public policy that can easily change is always a risk in real estate development, said Rick Porter, a land development and real estate brokerage expert and the director of Georgia Tech’s Master of Real Estate Development program.
“I’m not saying we’re at the end of the policy, but there is competition from other places now getting on board with policy,” Porter said. “Policy here is starting to recognize that and implement ways to blunt some of that pressure on American businesses, but it’s not like gathering up population data and trying to figure out how many potential new households there will be.”
‘Changed the course of my life’
Raulet never intended to go into the soundstage business — it fell into his lap as the market cratered during the Great Recession. One of the first buildings he represented as a broker was relatively derelict. In trying to figure out what to do with it, he contacted the Georgia Film Office and asked them to keep him in mind if anyone inquired about cool warehouses to film a music video.
After the film tax credit passed, a producer on the film “Road Trip 2: Beer Pong,” complained to the film office about the fact that he couldn’t find a broker to help him find space. No one wanted to take on the assignment because it was a short term deal and the commission was negligible. The film office then referred him to Raulet, who took on the job because he was desperate for work and wanted to remind himself that he had value as a broker.
“Taking that one call changed the course of my life,” Raulet said. “For 15 years, post-film credit, I’ve seen [the industry] go from nothing to something to back to almost nothing.”
Raulet’s stages are different from many of the others that have popped up in Atlanta over the years. They’re all converted warehouses, which meant the stages didn’t require taking on a ton of debt to get them up and running. At its height, Raulet’s soundstages totaled 625,000 square feet.
The surge in demand for content, coupled with record lows in vacancy rates for industrial warehouses that could’ve been converted to soundstages, lured developers to build large-scale, purpose-built facilities and well-heeled institutional investors such as Blackstone into the soundstage game. Atlanta more than doubled its available soundstage space between 2020 and 2024 to 4.4 million square feet.
As conversion projects, Raulet’s stages didn’t have all the trappings of newer, ground-up stages, such as backlots or virtual reality facilities. But they had key advantages. They were mostly located in the city, and could offer rental rates that were lower than their competitors. Now, that decision is enabling the company to convert them back into warehouses to fit manufacturers or other industrial users. Others aren’t as lucky.
“People poo-pooed us for a long time for being conversions of warehouses and not purpose built facilities,” Raulet said. “It always made us laugh, because our returns were probably just as good as theirs, with [putting] a lot less money into the properties.”
Every type of commercial real estate goes through a cycle of expansion, oversupply, recession and recovery. Now, soundstages are in the trough of the cycle.
Earlier this year, a producer approached Raulet and inquired about the cost of renting one of his stages to film a TV pilot. Raulet didn’t give him a quote. Instead, he just told him to tell him what was in his budget.
The producer gave him a very low number — less than half what an industrial user would pay to occupy the same space. But Raulet agreed to it. But then another studio in town gave them space for free in the hopes that they would get picked up for a full series.
“At that point, you go, ‘What am I doing?’” Raulet said. “If all these other brand new studios with mountains of debt behind them are giving away their space just to get a warm body in, that’s not a game I want to play in much anymore.”
‘Onesie-twosies’
It’s basic supply and demand: fewer stages in the market is better for operators.
There is less competition out there to land a smaller pool of projects, which can alleviate some of the pressure of charging bottom-of-the-barrel rates. But it doesn’t do away with the problem, Porter said.
The industry is still suffering from a demand problem.
“Right now shows are trickling in onesie-twosies and they know they have every stage operator on their knees begging for some occupancy. It’s a race to the bottom on rates at that point,” Raulet said. “So until there is enough volume where the studios can start pushing the rates back up to a normal level that produces a return for their investors, that’s the big question: When is that going to happen? And it doesn’t appear that there’s any catalyst on the horizon that is going to cause that to happen anytime soon.”
The entertainment industry is changing so rapidly that it is impossible to predict what it will look like within the next few months, never mind one or two years ahead. Artificial intelligence presents a real concern to soundstage operators, and so does shifting consumer habits. What is the future of a soundstage when content creators receive millions of views from livestreaming from their bedrooms?
“There was a whole lot of growth that I was a witness to that was pretty cool,” Raulet said. “It was a good ride. We hope it’s not over, but it might be. If it is, we’re cool with it.”
About the Author
Savannah Sicurella is an entertainment business reporter with The Atlanta Journal-Constitution.
