How a Disney/Fox Merger Could Impact L.A. Office

Office investors are keeping an eye on the potential merger between Disney and Fox. While the deal is months from going through—and includes a bid from Comcast—a Disney/Fox merger could mean significant office consolidation in Los Angeles at the beginning of next year. Olive Hill Group is one office investor that is watching the deal closely, and the firm is being cautious about new investments in Los Angeles submarkets, like Burbank, that might see an increase in supply.

“One of the things that we are keeping an eye on is the Disney and Fox potential merger,” Tim Lee, VP of Corporate Development and Legal Affairs at Olive Hill Group, tells GlobeSt.com. “Comcast has just jumped in to the ring in the last couple of weeks to submit and all-cash offer, and Disney is weighing its options. If Disney and Fox tie-up goes through as originally planned, there is some concern that there will be some consolidation and some giving back of space. There is a lot of overlap in the L.A. market between the two firms. If Fox goes to Comcast, there is not as much overlap, and ultimately that merger option might be better for the market because any kind of consolidation will be less severe than a Disney-Fox tie-up.”

There is still time before the deal goes through. With two offers on the table, Fox will likely review the options soon to make a decision. However, it could take longer if both companies are competitive. It depends on if this turns into a bidding war, but it sounds like in the next month Comcast will put in its bid. Then the board at Fox makes a decision, so we anticipate by the fall or by the end of the year that the merger will have been completed, assuming that the anti-trust approvals are given. If the Disney deal does go through, we expect that they will be looking at ways to consolidate at the beginning of next year.”

While Olive Hill Group is following the deal closely, they don’t see a long-term impact. If Disney wins the bid and there is some office consolidation, Lee expects the space will be absorbed by other media tenants. Content creators like Netflix and Hulu are growing rapidly, and that growth could offset any consolidation at the beginning of the year. “If there is any consolidation, we think that it will be limited to the Burbank and Hollywood area, and so we are being cautious when looking at opportunities there,” says Lee. “However, any consolidation might be snapped up from other content companies, like Netflix, which are continuing to grow. It might be short-term pains beginning next year. We expect that those pains won’t last long, and that other content companies will be able to absorb that space within a year or two.”