AT&T-Time Warner Deal Means Uncertainty For CRE Markets

After besting the U.S. Department of Justice in court, AT&T is preparing to acquire Time Warner for $85B. It remains unclear what this acquisition will mean for commercial property landlords that lease space to the companies, or markets such as Los Angeles or Atlanta where both companies have large footprints.

As the companies join, it could lead to increased demand for more space in certain markets, or lead the cable and entertainment giants to cut redundant space. 

In Los Angeles County, for instance, AT&T-Time Warner will be one of the largest private office tenants in the market, accounting for millions of square feet, CoStar reports. Even a modest amount of consolidation would have some effect on the market.

In Atlanta, CNN and Time Warner’s Atlanta-based networks occupy 1.6M SF in the Downtown and Midtown areas. Any movement of staff to other cities (say New York or Los Angeles) could put large blocks of space on the market, roughly when new spec office buildings are also going up.

Even so, the green light for the merger is good, according to some industry observers, at least in terms of getting deals going.

"Today’s announcement is well-received within the real estate community," JLL International Director Carl Muhlstein told CoStar. "Uncertainty due to recent M&A and partnership activity prevented material [real estate] transactions." 

One reason that the deal's impact on real estate markets is so uncertain is that the deal is a vertical merger. That is, AT&T and Time Warner are largely in different wheelhouses, with the former distributing content and the latter creating it, the New York Times reports.

Unlike mergers in which similar companies join forces, the melding of AT&T and Time Warner doesn't represent quite as much redundancy in terms of real estate needs.

The deal also seems likely to spur other such mergers, with unpredictable consequences for various commercial real estate markets.

Comcast and Walt Disney Co. are going to make bids for 21st Century Fox, and the likes of CBS Corp., Viacom, Discovery Inc. and Lions Gate Entertainment might be tempted to merge, the better to compete with Comcast and the new AT&T-Time Warner combination, according to the Wall Street Journal.