The Importance of Environmental Site Assessments in CRE
Unfortunate fact: a large portion of Commercial Real Estate across the globe, especially in older, urban areas, is contaminated.
The Reality
Back in the days before we cared about the health and well-being of our planet, people used to dig holes in the ground to dispose of used motor oil, poured myriad chemicals into nearby creeks, and ignored leaking fuel tanks. “Don’t worry. That will soak in.” Thankfully, those days are (mostly) over, but we are still left with the ramifications of our ignorance. The majority of contamination of Commercial Real Estate is caused by petroleum leaks in Underground Storage Tanks (USTs), dry cleaner solvent spills, and chemical spills at industrial sites. While this contamination may pose a concern for potential buyers, it is usually not insurmountable. Property acquisition can almost always continue, provided the responsible (i.e. liable) party has been identified by the appropriate authority, and remediation (if required) has begun or has been completed. In some instances, the source of contamination isn’t even on the property. We’ve had cases where the property we were assessing for purchase was located across the street from a gas station that had a release of contaminants, and they migrated underground to our subject property. Careful attention should be given to the properties surrounding the subject property as well.
Why should you care?
A couple of reasons:
If it turns out the site is contaminated, and you can’t prove that the previous owner was responsible, you could be liable for the remediation (clean-up.) That could cost you millions.
If the site is contaminated, you may not be able to develop it.
No one likes environmental contamination. Even if your property is contaminated, there are plenty of programs available to help mitigate or eliminate the cost of clean-up.
Know What You Are Dealing With
Only a legitimate Environmental Site Assessment (ESA) can determine potential contamination.
That said, there are some sources of information that you can check yourself, prior to considering a site for acquisition. These checks are cursory in nature and should never be used as a substitute for a complete Phase I ESA conducted by a licensed environmental assessment company. Cleanups - Where You Live. This U.S. Environmental Protection Agency (EPA) interactive map and datasets provide information on a variety of site contamination.
Most states and regions/provinces’ departments of environmental protection have online databases containing information containing, at least, contamination caused by underground storage tanks. Several have simple, searchable maps or databases. We’ve built an interactive map to help you find them.
Don’t just limit your imagination to traditional pollutants either. Especially in rural areas, Methamphetamine contamination is a real problem. And yes, there’s a GIS app for that. And no, it’s not just Arkansas.
Remember, just because your subject property is not listed in an online database or website does not mean it’s not contaminated. It simply means contamination on the site has not been documented. There are several additional methods we utilize to determine previous uses of land including historical aerial imagery and archival records. This research may at least provide some insight into the type of business that operated on the site in the past.
Solutions
Again, contamination on a property is not necessarily a show-stopper. It all depends on the type and levels of contamination, determination of liability, and remediation requirement. Fortunately, in many cases, contaminated soil can be removed from the site, and replaced with clean soil. Tanks and hydraulic lines can be removed or sealed. In some cases, the property may not be developable for residential or multifamily use, but may be suitable for other uses. There are several excellent programs available to mitigate or eliminate cost of clean-up. If you are considering a property for acquisition and need help assessing or solving a potential environmental issue, we’re happy to assist. Given the amount of properties we’ve assessed worldwide, we have seen hundreds of instances of contamination. If we can’t advise you, we can at least point you in the right direction.