Pending TikTok Ban and the Impact on Our Industry

TikTok was dealt a blow on Friday, January 10, 2025, when the Supreme Court indicated that it was inclined to allow the potential ban on TikTok to proceed on January 19. TikTok, which is owned by parent company ByteDance, could be blocked from U.S. app stores on January 19, 2025, if the Supreme Court declines to intervene and the company is unable to find a suitable buyer by that time. Below TRA has outlined the immediate and secondary impact to commercial real estate if TikTok is banned in the U.S.

Immediate Impact for CRE

The App is Blocked, but not the Business Entity > moderate impact

TikTok’s U.S. entities are likely to remain in the U.S. and continue to lobby U.S. government officials and industry peers to find ways to lift the ban or remove enforcement. While many business activities, like marketing, may be scaled back, other functions, like its U.S. Data Security, Inc. (“USDS”), which was created to protect U.S. user data, are likely to remain active in the market. As such, TRA expects limited near-term impact on landlords with direct leases with TikTok and its U.S. based subsidiaries.

Headwinds Likely for TikTok’s e-Commerce Partners > potential loss of revenue

TikTok’s e-commerce platform, TikTok Shop, operates as an e-commerce partner to TikTok sellers. Indirectly, TRA expects material disruption in the near-term if TikTok suspends U.S. operations, which would likely limit TikTok sellers from fulfilling customer orders. As a result, warehouse operators, logistics companies, and other businesses involved in TikTok’s supply chain, could see loss of revenue. Companies that rely on more than 20% of revenue from TikTok could see margins compress and may struggle to perform on leases.

Secondary Impact for CRE

TikTok Entity and Affiliates > continue performing

Assuming the ban is enforced in the Trump administration and TikTok is unable or unwilling to sell to an approved buyer, TRA expects TikTok usage to drop materially in the U.S., even with some users seeking ways around the ban using a VPN. TikTok’s U.S. operations may gradually scale back, but U.S. customer data is likely to remain a valuable asset for TikTok’s primary U.S. data management and security partner, Oracle, among others. As such, TRA believes that direct leases with TikTok, particularly with USDS, are likely to continue performing.

TikTok Partners > potential defaults

U.S. based e-commerce partners could face challenges longer-term if they are unable to replace lost business related to the TikTok Shop. These companies, especially newer third-party logistics (“3PL”) providers, as well as warehouse operators and other supply chain service providers, may face material credit challenges. As such, TRA expects to see some lease defaults among highly concentrated e-commerce partners.