Analysts: Disaster looms in commercial real estate

Since the start of the decline in the housing market, countless homeowners have yielded to the threat of foreclosure.

They have walked away without a fight. They turn their keys over to the lenders and try to salvage what they have left in the bank.

The same has started to happen among commercial property owners, analysts say. They don't want to burn their savings only to delay the inevitable.

"That's what I'm starting to see," said Gary Clendenin, a real estate attorney who works out of Spring Hill and New Port Richey. "People have voluntarily stopped paying their mortgages.

"I don't think we've seen the worst of it," he said of the real estate crisis. "The commercial (foreclosures) are going to start trickling in."

Many of the new local commercial property owners have either seen their tenants leave or have struggled filling their spaces.

No one currently occupies the newly renovated By-Pass Plaza along the State Road 50 truck route in Brooksville.

Just down the road, the Horse Lake Plaza has only a Beef O'Brady's and a beauty salon. The construction at that site was completed more than six months ago.

Owners for both properties were out of town and unavailable for comment Friday.

The Regent Oaks property, located along Spring Hill Drive along the north end of the Airport Industrial Park, is one signature away from filling about 80 percent of its space, so its outlook may be better than most.

The process still has been a struggle, said Regent spokesman Doug Bailey.

"The homes we expected to be built in the area have not been built," he said.

Regent Oaks was designed to be one-third retail and two-thirds industry. It has mostly been industry and office space with only one retailer - Dollar General - signing a long-term lease.

Regent owns 30 properties across the region and most of them are industrial. The company has mostly stayed away from retail, but tried it in Spring Hill as an "experiment" due to the location and the promise of more residential and commercial development, Bailey said.

U.S. Rep. Ginny Brown-Waite, Career Central and the Census Bureau occupy some of the space for their offices at that location. More tenants are expected to sign next week, he said.

Businesses inside retail centers are closing down, particularly the smaller businesses such as nail salons, gift shops and other niche stores.

With those businesses closing and not paying rent and fees, commercial property owners are compensating by charging their current tenants more per month. Some feel they are being treated unfairly and seek legal council, which costs more money for both the owners and tenants.

Ultimately, the ones who lose the most are the local banks that have funded a lot of the area's commercial development.

"We got overheated," Scott Clandening, president of the Florida Gulf Coast Commercial Association of Realtors, told the Tampa Tribune last month. "We don't have 1,000 people a day moving into Florida anymore, so retail is going to suffer."

Analysts have predicted that about 200,000 businesses and 10 percent of the nation's shopping malls will shut down during the next year.

Spring Hill attorney Clendenin thinks most of those closings will occur in California, Nevada and Florida. Those are the states that have suffered the most since the housing bubble burst.

Several homeowners in Florida signed up for mortgages worth $500,000 or more when they built and purchased their homes a few years ago. The payments for the first few years were relatively inexpensive because they were only paying at a reduced interest. Those who have paid $900 per month for their homes are now starting to pay more than twice that amount, Clendenin said.

Either they agreed to the mortgage thinking there would be no economic crisis and they would have more disposable income, or they didn't read the contracts carefully, he said.

Secondly, many of those mortgage holders also own commercial properties. When their houses foreclose, so will their businesses.

"I have one client who paid $2,200 a month for his house after he signed," Clendenin said. "After his mortgage reset, he now pays $5,000. That's all he makes in a month."

Don Whiting, who owns Whiting Insurance and Oaks Walk Plaza along Powell Road in Brooksville, feels the county should take everything into consideration when they assess commercial property.

"It's a combination of things that have caused this to happen," Whiting said of the decline in local commercial retail industry. "I think one of the causes has been improperly assessed property. The tax rates I think are pretty consistent, but the property assessments have been way above where they should be."