BOOMING BUSINESS; REGION REAPS REWARDS FROM HOLLYWOOD GROWTH.

Byline: Dave McNary Daily News Staff Writer

The San Fernando Valley, despite its image as little more than a massive suburb, has become one of the driving forces of Hollywood, a place where the nuts-and-bolts work of entertainment production takes place.

Within a two-mile radius from downtown Burbank are three of the biggest studios in the world - Disney, Warner Bros. and Universal, which generated an astounding $34 billion in revenues last year. Television has a huge presence with NBC in Burbank and CBS Studio Center in Studio City.

That's just the start. As worldwide demand for new programming grows, production companies have been scrambling for space beyond what Johnny Carson used to derisively call ``beautiful downtown Burbank.'' Here are some of the most notable examples:

For more than a year, hundreds of Disney animators have occupied a former Lockheed plant near the Burbank-Glendale-Pasadena Airport that was once used to develop technology for spy planes like the SR-71 and FA-117. Disney also bought 96 acres of property in Glendale last year from Prudential Real Estate, figuring it made more sense to own rather than rent.

The massive Marquardt plant in Van Nuys, once used to build anti-tank bombs, is now rented out to movie and TV producers such as Disney, Warner Bros. and Spelling Entertainment, with as many as five productions shooting simultaneously.

The former Redken shampoo factory in Canoga Park has been renamed Ray-Art Studios and is home to four massive soundstages with more on the way. ``We must get six calls a week from production companies looking to shoot pilots here,'' said Harry Smith, general manager of the facility. ``I wish we had more space because there's definitely a demand for more large stages.''

Panasonic announced in March it would move into 45,000 square feet in North Hollywood to accelerate development of digital products.

Nickelodeon opened an animation studio in Glendale earlier this year for production of five TV series, and DreamWorks SKG opened its animation headquarters in the city a few months ago.

Lincoln Property Co. agreed earlier this year to buy Lockheed Martin Corp.'s Rye Canyon aerospace test site in Valencia and convert much of the 511 acres to entertainment production.

Lincoln also plans to build 600,000 square feet of buildings at the vacant railroad yards north of Dodger Stadium for post-production and multimedia companies that can't find space in Burbank, Glendale and Studio City.

Location filming outside studio lots is booming. ``The industry is just jamming right now,'' said Jim Thompson, head of the Real to Real location-scouting service in Van Nuys.

And finally, after years of devastation in the commercial real estate market, developers are erecting ``spec'' structures designed to attract entertainment companies - the 24-story Glendale Plaza, which recently opened, and Burbank's six-story Media Center, due in 2000, between Warner and NBC.

All this comes against a backdrop of hundreds of Valley businesses already delivering the thousands of nitty-gritty show business details every day, from prop builders to those who insert laugh tracks in situation comedies. The success of the entertainment industry has been so thorough that Burbank now boasts an office vacancy rate of less than 5 percent while Glendale's is under 7 percent.

All this has not always been so.

``It's remarkable that in 20 years the entertainment industry and the movie industry has gone from an era where its very survival was questioned due to video and cable into an era where it has rebounded resoundingly,'' said William R. Boyd, a senior vice president of Grubb & Ellis and a veteran broker of commercial property in the Valley.

For Boyd, a key move came in the early 1990s when Disney began to move some of its corporate operations, such as its Disney Store headquarters, from Burbank to Glendale.

``Historically, with Warner and Disney rooted in Burbank, it wasn't too long ago that there was still a lot of resistance to go outside,'' he recalls. ``The proximity issue was paramount, to coin a phrase. I can recall a conversation in 1990 that even though you could see Glendale from Burbank, Glendale was still too far way.''

David Defore, first vice president at CB Commercial in Sherman Oaks, said the demand for space for entertainment companies is now percolating through the entire Valley. ``It just gets heavier as you go toward the Burbank Media District,'' he said.

That's resulted in higher rental rates - now better than $25 a square foot annually in Burbank - and drops in vacancies as far away as Woodland Hills, where Warner Center's figures have gone down from 18 percent a year ago to 12 percent.

``It's a real smorgasbord of demand, but most of it tends to be around major studios as a first priority,'' Defore said. ``But if they're looking for a better price or the owner lives in the West Valley, then the location of the 405 and the 101 freeways can be a location people can compromise on.''

All this means that the rest of the area will benefit over the long term. ``What you're seeing is labor-intensive companies like insurers getting priced out of the East Valley and coming to places like Valencia,'' Boyd said. ``Those that don't need to be in the East Valley will migrate to more affordable markets.''

There could be a few dark clouds on the horizon.

``We may see some slowing in job growth due to the Asian crisis,'' said Jack Kyser, economist for the Los Angeles County Economic Development Corp.

THE FACTS

MAJOR PLAYERS

Half of the world's top studios are within a two-mile radius in the east San Fernando Valley:

Walt Disney Co.: Sets the tone for everyone else. Shed its sleepy image over the past decade by launching Disney Stores chain, boosting film production, reviving animation business and buying ABC and ESPN. Among the best in the world at exploiting brand names.

Warner Bros.: A horrific slump in films has shifted attention away from strong fundamental assets in TV and music at this Time Warner Inc. subsidiary.

Universal Studios: Ownership by Seagram Co. over the past three years has helped energize operations although the loss of Steven Spielberg to DreamWorks SKG is profound. CityWalk concept seems solid and not just a fad.

ONES TO WATCH

Dozens of other entertainment firms dot the area. Some to watch:

Four Media Co.: The Burbank-based company has been on an aggressive acquisition pace since its founding five years ago as a one-stop shop for production services. Despite strong support from analysts tracking the company, it has not been able to convince Wall Street of its long-term prospects.

Image Entertainment: Should DVDs catch on to any significant degree - and most analysts expect DVD readers in most new PCs by the end of this year - this specialist in laser discs could see a massive new profit center.

FORECAST:

Sunny. There were 138,700 entertainment jobs in Los Angeles County at the end of last year and analysts believe about half were in the Valley. One forecaster said the total number would be up by 11 percent this year.

Additionally, the Valley represents the ultimate trump card in the ongoing struggle by DreamWorks to build a studio in the Playa del Rey area. Should the negotiations fall apart, North Hollywood is considered the second-best location.

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