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Discovery to Reprogram its Real Estate Pending Scripps Acquisition Approval

Cable Firm Moving HQ to NYC in 2019, With Relo from Silver Spring and National Operations Ctr. Planned for Knoxville
January 10, 2018
As its acquisition of Scripps Networks inches toward a close, Discovery Communications (Nasdaq: DISCA, DISCB, DISCK) is making a major change in its office real estate lineup.

The cable broadcaster announced that it will relocate its Silver Spring, MD-based headquarters to New York City in the second half of 2019, but cautioned that the move creating a global headquarters in the Big Apple is contingent on the close of its Scripps Networks Interactive acquisition.

The network acquisition is expected to close in early 2018, according to Discovery, which announced its intent to purchase Scripps in a $14.6 billion, cash-and-stock deal back in July 2017.

The move is meant to give both broadcasters a competitive edge in an entertainment world increasingly dominated by streaming services. The combined entity’s ad-supported, pay-TV audience share would reach nearly 20 percent, Scripps and Discovery said, and together they would produce 8,000 hours of original programming, 300,000 hours of library content and 7 billion short-form video streams monthly.

Discovery’s plan is to bring together all current Discovery and Scripps team members, from four different New York facilities into the new global headquarters, CEO David Zaslav said in a note to employees.

"Our ad partners on Madison Avenue, investors and analysts on Wall Street, many of our creative and production community and, increasingly, our new short- and mid-form content partners, are based in New York," he wrote.

But with the acquisition still under DOJ review, sources with knowledge of the deal said the Silver Spring campus will remain open for about a year. Meanwhile, space and location planning for the New York City site is currently underway.

JLL has been retained to represent Discovery in its decisions regarding its Silver Spring and New York properties. Although the goal is to eventually combine New York-based employees, no final decisions have been made on exactly which functions will be combined. Those decisions will ultimately determine square footage requirements for the New York City location.

When Discovery is ready, there will be space available - albeit pre-leasing figures have already claimed a chunk of forthcoming supply. About 22.1 million square feet of new office supply is anticipated to come online between 2018-2022 in New York City and 8.4 million square feet has already been pre-leased, according to a recent office leasing outlook from Cushman & Wakefield. The highest level of new supply will be delivered in 2019, totaling about 6.9 million square feet, of which 4.8 million square feet has been pre-leased.

Discovery’s current headquarters at 1 Discovery Place in the Silver Triangle of suburban Washington D.C. was built in February 2003. The 10-story, 5-Star office property spans 545,420 square feet, according to CoStar data. The network fully occupies the space, housing about 1,300 employees. Discovery says it expects to sell the property approximately one year after closing the Scripps acquisition.

Discovery CEO David Zaslav called the headquarters move an, "Important next step for the long-term success of Discovery." In a note to employees, he said that in order to survive, Discovery must evolve with the media industry as it becomes more global, consumer-focused and multi-platform.

Knoxville for National Operations

Scripps’ Knoxville, TN base will be repurposed into a national operations headquarters for the combined company, Discovery said, citing the low-cost of living within the city and self-contained nature of the campus. Scripps’ creative digital teams and major brands will remain there. About 1,000 Scripps employees are based out of Knoxville.

Located at 9721 Sherrill Blvd., the Scripps Knoxville campus totals 155,000 square feet in a four-story property that was built in 1998 and renovated in 2010.

"From an operating and financial perspective, it became clear that, pending closure of the Scripps transaction, we could not operate three large facilities in the U.S. Since the announcement of the deal, we have evaluated the strengths, capabilities and advantages of the Knoxville, Tennessee campus, which houses the major Scripps brands and creative digital teams along with corporate functions," Zaslav wrote.

Sterling as the Technology Hub

Discovery’s Sterling, VA property, situated at 45580 Terminal Dr., will become the firm's Northern Virginia tech hub. The building, a 54,688-square-foot flex telecom and data hosting center according to CoStar data, will likely undergo an expansion over the next year, according to sources.

A Maryland Network Hub

The broadcaster also plans to maintain a network hub in Maryland for select functions, including government relations.

"To continue to support and draw from the community in Maryland, and to house select network and support functions, we will create a Maryland Network Hub. The Maryland location also will house other select functions, such as government relations, that are logically based in the Metropolitan DC area, as well as our Discovery Education division," Zaslav wrote.

Following the expected Scripps acquisition, Discovery said it plans to evaluate other facilities for duplication while also looking to bolster its creative hubs in Los Angeles, London, Miami, New York, Warsaw and Milan, Zaslav said.

Diana Bell, New York City Market Reporter  CoStar Group   
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