Gulf Oil Spill Harming Market

For the past few years, commercial property owners in the Gulf Coast haven't had much to celebrate. Now the problem has gotten worse as a result of the BP oil spill.

Despite BP's promise to assist those hit hard by the spill, many commercial property owners in the Gulf Coast are struggling, especially hotels and restaurants, and have told sources that they feel they have been left on their own to sink or swim. BP's initial focus “has been on getting money into the hands of fishermen, shrimpers, condo owners, and others who have not been able to earn income due to the spill,” said Darry Willis of the BP claims team. “We have also been addressing the larger, more complex claims and have been successful in sending more checks to commercial entities.”

However, some industry watchers are predicting that more property owners will face foreclosure as the situation spreads and worsens. “Unfortunately, Gulf Coast commercial property owners are getting hit even harder now,” said Jeramie Concklin, CEO of Guardian Solutions, a Florida-based commercial loan restructuring firm. “The last time they or this nation suffered such a disastrous combination of commercial real estate factors—a very tight credit market, deflating property prices, deteriorating rents, and plummeting occupancy rates—was in the 1990s.”

Concklin noted that “because there's still an estimated $3.5 trillion of loans outstanding and probably another 12 to 24 more months of rent declines, we can expect—and frankly forecast—a continuation of commercial property defaults.”