What will happen to TikTok if it is banned in the U.S.? It seems everyone is asking that question, not just the younger folks worried about their feed. The question is particularly important for office real estate, as TikTok has been one of the few tech companies aggressively investing in office space. The Senate recently passed a bill forcing its Chinese owner, ByteDance, to sell or ban it. President Biden signed the bill into law. What happens next will be a complicated process that could drag on for months or even years. The law allows TikTok to continue operating in the U.S. if ByteDance sells it within 270 days, which the president could extend to a year.
Congress passed the bill because of national security concerns about TikTok’s Chinese ties. Lawmakers have cited the risks that the Chinese government could access sensitive data from ByteDance belonging to its 170 million American users or spread propaganda. While the messy fight over the ban continues, the popular app will likely continue functioning for U.S. consumers.
ByteDance has vowed to challenge the law in court, and the Chinese-owned company hasn’t backed down in the ongoing tussle. During TikTok’s recent annual spring pitch to marketers in Manhattan, a company official said TikTok considers the ban unconstitutional. “We believe the facts and the law are clearly on our side and that we will ultimately prevail,” said Blake Chandlee, TikTok’s president of global business solutions. “I want you to know we are not backing down.” The company hasn’t filed a lawsuit yet, but it’s near-certain it will.
Many American users of TikTok wonder what will happen to the app, but office landlords of spaces that TikTok occupies have their own questions. For a company with a precarious future in America, TikTok and its parent company, ByteDance, have not acted like they’re about to be banned.
While other tech firms shrink their office footprints, TikTok reportedly plans to rapidly grow theirs in the U.S. by hundreds of thousands of square feet. The company is discussing a lease in Nashville for over 100,000 square feet in one of the city’s newest developments in the heart of Music Row. TikTok has leased space in a Nashville WeWork location for the past two years while it searches for more permanent space.
The social media company is close to finalizing a deal that would double its existing space in Bellevue, a Seattle suburb. TikTok will lease about 132,000 square feet at the Lincoln Square North tower, vacated by American-based tech giant Microsoft. In San Jose, California, TikTok is working on a sublease agreement to expand its footprint there too. It currently subleases about 660,000 square feet from Roku and is looking for potentially more than 357,000 square feet of additional space. Elsewhere, TikTok leases office space in New York City, Los Angeles, and San Francisco, according to CoStar.
TikTok hasn’t finalized any of these deals, so they could still fall through. However, the company’s intention to grow its office footprint is welcome news for landlords accustomed to tech tenants cutting space in recent years. After years of bolstering office footprints, big U.S.-based tech firms like Google, Meta, and Apple are drastically downsizing their office presence across the nation.
According to CBRE, office space listed for sublease in 30 cities with a high concentration of tech tenants has risen to the highest levels in at least a decade. Tech firms that are renewing or adding new space also want less than before. CBRE reports the amount of new office space that tech companies leased decreased by almost half in the fourth quarter of 2023 compared with 2019. TikTok is a breath of fresh air in a struggling U.S. office market.
A hardline approach to RTO
Unlike the big American-based tech firms, TikTok has plenty of room for growth. The company only employs about 7,000 people in the U.S., and its office footprint is far less than the bloated size of companies like Google and Meta. Meta has 62 offices across the U.S., while Google has 35 U.S. offices and retail locations. Apple boasts that it employs over two million Americans, primarily at its retail locations. Globally, Tiktok’s parent company, ByteDance, employs more than 110,000 people, but its presence in the U.S. is much smaller than that of American-based tech giants.
Another reason TikTok wants to expand its U.S. office presence is its aggressive return-to-work policy. Last fall, the company rolled out an app called MyRTO, which was built into its internal software to monitor employee badge swipes. It asks workers to explain absence on days they’re supposed to be in the office. A dashboard with the tracking data is visible to workers, their supervisors, and human resources staff. TikTok told its employees that disregarding return-to-office policies may result in disciplinary action and affect performance reviews.
Many U.S.-based companies have pushed for a return to the office, but TikTok’s more authoritarian stance is rare. Google has asked most of its workers to be in the office three days a week and has said it will use badge swipes to identify prolonged absences. Google even indicated office absences could be incorporated into performance reviews. However, few American firms have created custom dashboards like TikTok that show daily logs of badge swipes.
TikTok’s attitude toward in-person work is likely influenced by its Chinese ownership. Data shows workers in the Asian-Pacific region have largely returned to the office, much more than American employees. “For companies, especially where they have leadership based in this region, they probably don’t see what the big deal is because they’ve been doing this for well over a year,” said Zach Dunn, the founder of hybrid work management company Robin. TikTok’s hard-line stance on return to work is another plus for U.S. office owners. With a stricter push to get employees back to their desks, TikTok values office real estate perhaps more than rival American firms.
A protracted legal battle awaits
Now that President Biden signed the TikTok legislation into law, what will happen next is anyone’s guess. One certainty is that TikTok will challenge the federal government in court. Its case will likely hinge on the First Amendment, with the company arguing a forced sale would violate users’ free speech rights. Groups like the American Civil Liberties Union have strongly opposed a ban and may even join the fray. TikTok has a strong record in similar court battles in the U.S. Federal judges blocked the Trump administration’s effort to force a sale or ban the app in 2020. A federal judge also blocked Montana’s effort to ban the app last year because of its Chinese ownership.
If a sale is forced, divesting TikTok from its Chinese parent company would be complicated. TikTok’s coveted recommendation algorithm is crucial to the app’s success, but ByteDance owns it, and Chinese engineers work on it. The Chinese government issued export restrictions requiring regulators to grant permission before ByteDance’s algorithms could be sold or licensed to other companies. Few companies would want to buy TikTok without the algorithm, and purchasing TikTok would already come with a costly price tag.
A potential TikTok ban would be a rare move, but some precedents exist for banning companies in the U.S., especially those linked to China. In 2022, the U.S. banned the sale of communications equipment made by Chinese companies Huawei and ZTE and restricted using some China-made video surveillance systems. Like the TikTok case, the government cited national security concerns. The Trump administration also issued an executive order in 2021 that blocked Chinese apps like AliPay and WeChat from U.S. app stores. TikTok was also included in that ban, but President Biden revoked it when he took office.
The U.S. isn’t the only country to seek a TikTok ban. Many countries, including Australia, Belgium, Canada, India, and New Zealand, have banned the app to varying degrees. Most bans only include government-used devices, but India implemented a nationwide blanket ban on TikTok and 58 other Chinese apps in 2020. TikTok’s audience in India was even larger than in America, estimated at 200 million at the time of the ban. India’s reasons for the ban were more dramatic than those of the U.S. Twenty Indian soldiers were killed in a 2020 border skirmish with China, and the ban was instituted a mere two weeks later.
It’s doubtful an outright ban on TikTok in the U.S. would move as swiftly as in India. The more likely scenario is a protracted legal battle. TikTok has publicly been silent on what a ban would mean for its U.S. real estate holdings and business operations. If it did happen, the divestment of TikTok’s American business holdings would likely be handled by government entities like the Committee on Foreign Investment in the U.S. and the Office of Foreign Assets Control. These entities address concerns with properties critical to national security. They can limit real estate holdings from companies and individuals based in countries the U.S. deems prohibited, such as Russia and Iran.
The divestment of TikTok’s real estate holdings would be a complicated legal undertaking as well. However, the landlords who lease these spaces to TikTok may not be too hard-pressed to find replacement tenants. Most, if not all, of the office space that TikTok occupies in the U.S. is premium Class A space that would be highly attractive to other tenants. However, an outright TikTok ban would pull the plug on a rapidly growing social media company looking to expand its office presence. Losing a tenant as serious about in-office work like TikTok would still sting.
The fight over TikTok will unfold over the next year, and the company shows no signs of backing down. TikTok officials may be scrambling behind closed doors, but they are otherwise publicly carrying on with business as usual. That includes pursuing new office leases and running a social media app that about half the American population uses. A TikTok ban would impact millions of small businesses selling their wares on the app, but it would also impact the country’s office sector. In a time when the office is faring so poorly, TikTok’s aggressive leasing has been a rare bright spot. Some landlords may hope TikTok sticks around even more than the app’s legions of content creators.
