Live-work rentals for musicians

[hastalavista]

I have a unique project I'm working on: it is a 10-unit live-work rental complex in an urban area (San Francisco Bay Area). What makes this unique is that the units are designed for musicians or producers; they have a stage/sound room and an area that is supposed to be a control room (but is not fully functional as such).

Some background:
Building was originally an industrial building, and was then converted (circa 1990s) into rental units.
The rental units include at least one bedroom, an area that is designed to be an office space (but is commonly used as another bedroom), living area/kitchen, a bath, and then the stage/sound room and control room. Each unit is single-level (not a loft), and range from about 800-1,000sf.

In doing some research for this project and looking at other live-work configurations, what really stuck out was the number of live-work spaces that specifically stated "no musicians/bands" in their advertising.
I interviewed some of the tenants, and they confirmed that (a) musicians are typically not welcome in the live-work projects (for the obvious reasons), and (b) that the subject project was unique; none of the tenants were aware of any other type of similar project that was developed specifically for musicians to live and practice their trade.

The quality level of the sound room is not high or what would be considered "professional recording studio" quality. I had a friend of mine who is (a) an appraiser, (b) a member of a band that has several albums, and (c) has his own sound studio where he produces his own records, come along on the inspection, so I'm getting some expert advice on the recording/mixing/sound stage aspect of this project.

This property was purchased recently out of foreclosure. The owner is a local and sophisticated real estate investor (I've appraised a number of his properties for several different lenders over the last 3-4 years).

The ideal tenant for this property is not so much a musician who will do recordings on-site (the sound rooms are just not meet the industry standards), but an engineer or electronic-music mixer. DJ mixing is also a good fit. Finally, the sound rooms can be used for a "practice stage" (one of the tenants does have his band, a rock & roll band, practice there), but again, it isn't a studio-recording quality type of area.

Based on my preliminary research, there is demand for this type of space, in the rental range of $1,500 to $1,900/month. I wasn't sure there was enough demand, but I'm confident there is.


That's the property. Here is my situation
I can find basic rents for the area.
I can find rental rates for sound studios and practice stages.
I do not have any similar "music-orientated" projects in my market.

I'm wondering if anyone else has done a similar project?
Even if not specific to music, maybe an artist's enclave or something like that?
The biggest question is (obviously) how would investors price this (cap rate)? It stands to reason that because of the unique character of the building, even with good demand, the cap rate should be higher than what a typical apartment is trading at (all other things being equal... but obviously there is one big and significant difference).
I'm thinking if such artist enclaves sales exist, maybe a relationship between their cap rates and the standard apartment cap rates in their markets can be established, and possibly applied to my subject.

Or, there may be another way to approach this that someone else can suggest.

I'm happy to call and discuss the situation with anyone who might (and care to) help. Or, PM/email me via the forum, and I'll shoot you my email.

Thanks!

Denis

 

[leasedfee]

Just My Opinion: This is just a gimmick to obtain market share and not a real property issue. The main gimmick is "I won't complain about your noise, because you won't complain about my noise." The second gimmick is the joy of social camaraderie. The third gimmick is let's juice a community space with some sound equipment. It's nice don't get me wrong. BUT don't confuse business value, if any, and personal property with real property. However, just because an apartment or condo complex has a gym, a pool, business room, or community hall, does not mean you would use sale comps of a gymnasium, pool house, office building, or church/fraternal hall to value that component of space. Here there's a local developer who converts old 1960s blonde brick apartments in central Denver into a theme building. It means nothing but adds a little variety to life. Another building touted itself as "smoke free" apartments -- until it was demolished to build something huge. Others tout themselves as being pet friend or pet unfriendly (and I explained to a banker that the pet income is -- at best -- a break-even -- and doesn't trickle down to NOI. All these things are nice but, again, just marketing gimmicks. Your subject sounds like to me a converted warehouse that will be rented out commensurate to its general quality, and owned by an investor who'd otherwise buy a multi-family building in that market. Any marginally higher rents will have to pay to replace the community equipment that will be obsolete or junk in a few years. Just my 2-cents.

 

[hastalavista]

Tim:

Your 2-cents is always worth much more.
Each unit has its own individual sound/stage room and control room. It isn't a community/project shared space (believe it or not, I had a call on something like that a while a go; the community rec. room was turned into a live performance theater, and the building was being marketed as an artists retreat. I passed on that one).

The current tenants are recording engineers, mixers, and one musician with a band. They are actually using the sound/stage rooms for their intended purpose (music related). They all sang the same song (which wasn't rehearsed.... no pun intended); the space is really appealing because they don't have to pay 2x rent (one for a place to live, one for a place to do their music/mixing/etc.).
However, probably with one exception, the others have additional jobs (one is probably a full time music engineer). This is definitely an "urban" scene, local clubs/DJs, etc., kind of tenant mix. Not national touring musicians.

So, could the sound rooms/recording rooms be used for something else?
Yes, for a fact, they could. But there are no windows; you feel like you are in a concrete bunker (with the sound proofing material on the walls). An interrogation room comes to mind! :laugh:

But seriously, I do appreciate your advice and I don't want to be sucked into the marketing-concept hype.

 

[George Hatch]

I'm pretty sure that if one of the hipster artists or some dominatrix wanted to move in these guys would cash the check.

 

[Lakefront boater]

I've recorded music and played for many years and have worked as a engineer in NYC. In areas where such as NYC, LA or Nashville there is a demand for practice space but I've never seen a live/work type of space such as the one you describe.

Recording studios in major markets have come on very hard times due to the loss of record sales and the low cost of recording equipment. It sounds like a pretty good idea to develop a warehouse into this type of property. I would of loved to seen what the place looks like as I'm a hobbyist now.

What's the size of the control room and what's the size of the sound stage rooms?

Is there a plexi-glass or glass partition between both rooms where an engineer can see a singer and record them similar to a commercial studio?

If so, freelance engineers could live in these places and record voice overs, overdubs, mixing music, internet radio programs, sound design for video games/internet (probably a common gig in the San Fran/Silicon area) and other types of sound productions which don't require large rooms.

 

[Renee Healion]

The 19th century stone thread mills here were converted by a group into artspace. Not musicians, artistes. Common space was a "gallery". They soon became subsidized housing. "Soon" may sound longer than it took for that to happen.

 

[hastalavista]

What's the size of the control room and what's the size of the sound stage rooms? Is there a plexi-glass or glass partition between both rooms where an engineer can see a singer and record them similar to a commercial studio?

Per my expert, the control rooms are really not functional as they are too small; there was a window, but most of the spaces have it boarded up.
The sound stage rooms are about (I'm doing this from memory right now) 350-450sf. Large enough for one of the tenants to have the set-up for a 4-person band.
The others were using the sound room as the area they did their mixing.

If so, freelance engineers could live in these places and record voice overs, overdubs, mixing music, internet radio programs, sound design for video games/internet (probably a common gig in the San Fran/Silicon area) and other types of sound productions which don't require large rooms.

This seems to be the fit.
The sound rooms for live music function better as rehearsal rooms vs. recording rooms. My guy took the background ambient sound level and did a few other things (he's going to write it up for me so I can understand); he explained to me that it would work for certain functions, and not work for others (along the lines that you describe).

What I didn't understand was the size of the potential market. While there are some who can do music or music-related tasks full time, the majority seem to do it part time; they'd like to do it full time, but there just isn't enough demand (or, perhaps their talent isn't sufficient) to do it full time. The set-up seems attractive to them, because the price of renting an apartment and renting a studio is more than renting this space.
And, they don't have to worry about the neighbors complaining.


We asked the tenants if they had any walk-in clients and if the live-work arrangement was a problem or impairment? I wouldn't have thought to ask that question, but my expert did; apparently, the engineers and mixers do have clients that come (I guess they do some recording, etc. there); they said the clients all thought the same thing: this is a pretty cool set-up.

 

[Lakefront boater]

Any type of artistic occupation especially one which relates to sound, music, or film has never been an easy industry. L.A. is a great example of that and always has been.

With the advent of internet and specifically digital downloads (seen a record store lately?) even those that have been successful in the past are trying to find ways to monetize their music productions since recorded sales are very meager even for top name artists compared to 20 years ago. The touring circuit, license fees for film, and air play royalties are what keep most music artists going who are at the top of the food chain.

Now it's up to the younger generations to figure out a way to monetize music in the digital age since even the brightest and best of the record labels can't get this digital age to work for them. It is interesting that the film industry has been able to hold on and keep movie theatres going and keep their business going.

Joe Walsh has a bit to say about the subject here: Joe Walsh on the music industry - YouTube

Consider that the Eagles Greatest hits was at one time the biggest selling album ever,even sold more than Thriller by michael jackson

 

[gregb]

We have several live/work condominium projects locally, which are considered in the market as residential units.

 

[Renee Healion]

Did they start out as a gimmick or have they remained as live/work, gregb?