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Following the July 13 assassination attempt made on former President Donald Trump, increased security surrounding the Republican nominee has created an obstacle course of sorts for agents trying to do their job in Palm Beach’s luxury market.

The Secret Service closed off a large swath of South Ocean Boulevard in front of Trump’s Mar-a-Lago Club on July 20, and the area is slated to remain shut down until further notice. The closure impacts the stretch of road from Mar-a-Lago north to where South County Road intersects with South Ocean Boulevard. According to the Palm Beach Police Department, the closure will likely last until at least the November election, the Palm Beach Daily News reported.

With the road officially shut down 24/7, individual residents or workers who need access must be approved to do so by law enforcement. The closure means that properties south of Mar-a-Lago are largely isolated from the rest of the island, and those properties north of the club are cut off from one of the three bridges that connect Palm Beach to the rest of Florida.

For now, the road closure is more of a minor headache for agents since the market is currently in the midst of its slower season, agents told The Real Deal. But it could become a bigger problem once more seasonal residents trickle back in the fall.

“I don’t see it as being positive,” Douglas Elliman agent Gary Pohrer told TRD. Pohrer will soon be listing a property adjacent to the club, and added that for potential buyers, it “can’t be something somebody would want to endure.”

Listings in the impacted area span in price from $13.9 million to $48.9 million. There were seven such impacted listings in the area as of Monday, according to Zillow.

Since they’re now isolated from the rest of the island, properties south of Mar-a-Lago have also been impacted to a degree, including a $40 million listing located at 500 Regents Park Road. Even though the listing is only about 200 feet away from Trump’s club, sales agent Rob Thomson of Waterfront Properties & Club Communities said he’s not concerned about the closure impacting the sale of his listing.

“Can it be annoying? Sure,” Thomson told TRD. “Is it horrific? No. Last time we all just got used to it.”

The island faced similar road closures when Trump was in office. Whenever the then-president stayed at the club while in town, the road would close and then reopen when he left town again.

A property at 1045 South Ocean was on the market when Trump was president in 2018, listed by Traci DeGeorge, who was then affiliated with Waterfront Properties. Although the closure impacted the property, Waterfront Properties owner Thompson said that it was no different than having to access a property within a gated community.

“The barricade was literally in front of the front door,” Thompson told TRD. “It was really not any different time-wise than pulling up to a gold community and stopping at the gate.”

Thompson happens to be a member of Mar-a-Lago, and lives in Admirals Cove, about 20 miles north of the club. He said having the Secret Service around while Trump was president didn’t serve as a deterrent to potential buyers.

“It made people feel really safe,” Thompson said.

Town Manager Kirk Blouin, is wondering why a 24/7 road closure is necessary, however, and has asked the Secret Service for a legal explanation.

“If there’s a protectee in residence, it makes sense,” Blouin told the Palm Beach Daily News. “If there’s no one there, I don’t understand the road closure at this moment.”

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After years of post-pandemic struggles, the commercial property market may at last be near-bottom after a quarter in which foreclosures hit their highest rate in nearly a decade.

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Portfolios of foreclosed and seized office buildings, apartments and other commercial buildings hit $20.5 billion during the second quarter of 2024, according to data provider MSCI’s Capital Trends most recent report. That figure is 13 percent higher than Q1 2024 and the highest quarterly figure posted since 2015.

The commercial market has seen a rise in defaults and other distress in recent years as a result of the slow return of office workers and rising interest rates. Despite those rising numbers of defaults, lenders have held off on taking over properties, hoping that a recovery was in sight — and that they could avoid expensive foreclosure actions.

“Lenders will do everything in their power to avoid that,” Keefe, Bruyette & Woods analyst Jade Rahmani told The Wall Street Journal.

An increasing number of lenders have determined that office buildings may never recover their previous values, even after rates decline, which is leading to more foreclosures and short sales.

Commercial property values could continue to decline if the U.S. goes into a recession, causing companies to start laying off workers and, therefore, require less office space.

Based on similar spikes in foreclosures during previous downturns, market bottom may be close at hand. Lenders typically sell properties shortly after seizing them, which helps determine market value after extended periods of inactivity.

Offices have been hit the hardest, with the volume of office property seized through foreclosures and other actions up by $5 billion year over year, according to MSCI. Meanwhile, apartment buildings, which have also suffered amid high interest rates and growing supply, saw an increase of $975 million in portfolio volume seized since the second quarter of 2023.

A number of high-profile commercial properties have been seized as of late, including a five-building Silicon Valley complex owned by a venture of Goldman Sachs and TMG Partners, which was taken over by KKR Real Estate Finance Trust. KKR held a $200 million mortgage on the property and took title at the end of June in a deed in lieu of foreclosure transaction. The trust is expected to start marketing the complex shortly after making upgrades.

In Washington, D.C., where the office market has struggled, several buildings have sold at steep discounts. State Farm Life Insurance recently made a foreclosure sale of an office building just blocks from the White House. The property sold for $17.6 million, which was a roughly 70 percent discount from the owner’s original purchase price in 2010.

According to developer Matt Pestronk, who has purchased two discounted office buildings in D.C., “Lenders are more dispassionate about values, and that’s a sign of a cycle moving” toward bottom.

Small banks with fewer assets (especially under $10 billion) have adopted foreclosures at a quicker clip. The total value of seized commercial properties these banks owned during Q1 rose by roughly $125 million from the previous quarter to $943 million, the largest quarterly spike since 2000, bank data consultant Matthew Anderson told The WSJ.

Even if the Fed begins to cut interest rates in the fall as analysts anticipate, the commercial market is expected to take a long time to recover — and some office buildings may never recover their lost value. The sector’s risk will extend “probably for years,” Fed Chairman Jerome Powell said in a Senate testimony earlier in July.

Regulators are concerned about that prognosis for the industry because of the implications it could have on the financial system at large. More than $2.2 trillion in debt maturities are expected to come due between now and 2027, according to data firm Trepp.

Signature Bank’s failure last year serves as an early sign of what may come for other banks that have a high exposure to commercial property.

Investors have pumped cash into other banks holding vast quantities of commercial loans in order to stave off such failures, including First Foundation and New York Community Bancorp. On Thursday, the latter’s shares dropped more than 3 percent after disclosing another quarterly net loss.

Another foreboding sign is the increase in problem loans that many creditors are facing, including Blackstone Mortgage Trust (which has a large exposure to office loans). Last week, the company cut its dividend and increased loss reserves by 19 percent to over $900 million.

The delinquency rate of office loans converted into securities also jumped by 8 percent this month for the first time since November 2013, according to Trepp.

Despite growing concerns in the market, the number of foreclosures and other property seizures are still well below those seen during the 2008-09 financial crisis. In 2013, the number of foreclosed and seized properties held by lenders surged to more than $45 billion, more than twice the current rate, according to MSCI.

Since building owners have been more willing during this downturn to walk away from properties than in the last financial crisis, foreclosure figures may not ever reach the level seen during that time. At that time, owners wanted to hold onto low interest rates and hoped for a recovery.

“This cycle, a lot of investors believe office values are challenged,” Nicholas Seidenberg of real estate investment banking firm Eastdil Secured told The WSJ. “They’re saying: ‘Hey, I’m going to just walk away and not fight.’”

Email Lillian Dickerson