Two weeks after the Gulf of Mexico oil spill, a residential broker in the Florida Panhandle blogged that the oil spill was already taking its toll on their local housing market. The location of the spill is 50 miles offshore and at that time was only seen in pictures and video. There were no effects yet on coastal wildlife or property. The broker explained that he lives in an area where property values are dependent on access to white sandy beaches and anything that threatens that has to be taken into account. “Part of what we sell is the lifestyle of living on or near the beach,” he blogged.

Though the residential market is already feeling the impact, the long-term effects of the oil spill are still unclear. The hotels industry in beach towns along the Gulf may suffer with the perception that those beaches are contaminated. And the fishing and shipping industry so dependent on that waterway are already feeling the impact, but may be able to return to ‘business as usual’ if the spill is effectively cleaned up.

A major commercial and residential developer in the Florida Panhandle with hundreds of thousands of acres of land noted on their website: “We will continue to collaborate with governmental agencies to monitor and manage the situation while also taking significant steps of our own to protect our assets. We are also working closely with environmental experts and have deployed resources to monitor, evaluate, document and take immediate actions. As of this time, we have not experienced any direct impact from the oil spill but we are in a position to execute an expedited clean-up of our beaches in the event it is necessary.”

On May 19 the heavy oil hit the Louisiana shore. On the same date, it was announced by the U.S. government’s top weather forecaster that a “small portion” of light sheen from the giant oil slick has already entered the Loop Current, which could carry the oil down the Florida Keys, to Cuba and even up the U.S. East Coast. While the oil giant has to date drilled two relief wells, each of these wells is estimated to take some three months to complete from the commencement of drilling. The latest plan is to develop a “top kill” operation where heavy drilling fluids are injected into the well to stem the flow of oil and gas and ultimately kill the well.

Rich Stone, CCIM, and senior sales and leasing associate at NAI Latter & Blum in New Orleans, indicates that right now the greatest impact has been on the fishing industry and the environment. “We’re waiting to see when it will stop spewing oil and where the oil currently in the Gulf ends up. It’s just too early to tell, but so far we haven’t seen any immediate adverse effects on property values.  New Orleans doesn’t have the beachfront property and resorts found in other Gulf Coast cities. In addition to impacting the fishing industries, we could also see more serious impact on local oil sector employment due to possible migration of the BP oil into the area of other platforms, causing further interruptions or shutdowns.”

Bernie Heggeman, SIOR, Principal of NAI Heggeman Realty Company in Mobile, AL echoes Stone’s comments on New Orleans. “The whole estuary and marsh system in Louisiana is the most priceless nursery for seafood in the entire Gulf Coast region. It is easier to clean up sandy beaches than the tremendous marsh system that produces so much of the regions’ seafood. That system simply can not be replaced. As for Mobile, the oil is still 30 miles off the coastline and based on current trends of wind and tidal movements, it is staying away from our area. Equipment has been put in place on our coastline in preparation for the worst. In my opinion, before the summer is over, the commercial and residential resort markets are going to feel a negative impact on values. Even if our area is spared for the time being, the possibility of a hurricane coming into the Gulf of Mexico this summer could potentially cause a disaster dispersing the oil contamination over the entire Gulf Coast from Florida to Texas. This season’s hurricane forecast indicates an increased probability for storms.  Aside from what might occur, there has been a temporary economic stimulus as BP has pumped a lot of money into the area by hiring local fisherman, those impacted the most, to assist in the cleanup.”

In Pensacola, John Griffing, SIOR, President of NAI Halford, said they have seen no oil on their coast. “BP has a big presence in Pensacola and is staging cleanup equipment here. They have also relied on our local charter fisherman to help them in their clean up efforts. The spill has really had the greatest impact on the local resort industry but it boils down to a perception problem. People perceive that oil will affect the area and are therefore canceling their plans and going to other southeast beaches, such as Myrtle Beach. As President of an upcoming SIOR chapter conference scheduled to be held in June at the Villages at Baytowne Resort, in Sandestin, FL, it is disturbing to see that attendance has been impacted due to this perception.”

Far too many variables play a role in predicting the coastline(s) that will be affected by the spill. I have read that the Loop Current is so strong that it could pull the oil from its current path and bring it up the East Coast, to as far north as the Carolinas. One thing is for sure, this is not a passing problem. I urge anyone in the real estate industry witnessing the effects of the oil spill on property values to comment and share what they are seeing. This is a relevant topic today and may be for months or years ahead if a solution is not found immediately.

-Patricia Faulkner

Patricia Faulkner is a Senior Vice President and auction specialist on NAI Global’s Special Asset Solutions team.