Phase 1 Environmental Assessments Up 13 Percent

MILFORD, Conn. — Demand for phase 1 environmental site assessments on real estate projects involving 10 or more properties increased 13 percent in the third quarter of 2011, reaching the highest level in five quarters, according to Environmental Data Resources Inc. (EDR), a Milford, Conn.-based environmental data firm.

Environmental assessments, also known as environmental due diligence or all appropriate inquiry, is a process used to determine how pollutants or other stressors may impact human health and the environment, according to the Environmental Protection Agency.

Phase 1 involves an examination of relevant records, interviews with owners, past owners and neighbors, and an inspection of the property.

Third quarter data shows that the number of aggregate phase 1 environmental assessments in the nation’s top five highest-volume states grew by 13 percent compared to the same period last year, outperforming the national average of 7 percent, according to EDR’s ScoreKeeper model.

California led the pack with 18 percent quarterly growth, followed by New York at 17 percent and Texas at 13 percent.

With Georgia and Florida ranking fourth and fifth, the top five states made up 37 percent of Phase 1 environmental site assessments conducted in the United States in the third quarter, driven by “healthy volume in their major metro areas,” according to EDR.

“Just as areas of the country went into the market downturn at different rates, they are recovering at different rates, so It’s not surprising that trends in due diligence activity vary considerably from state to state,” said Dianne Crocker, principal analyst at EDR Insight. “These five top-volume states share the perfect mix of drivers: they contain global gateway metros that are attracting investors’ interest and metros with the highest levels of distressed assets in the country. Together, these forces are driving demand for property environmental due diligence today.”

The strongest drivers for environmental due diligence work were distressed asset purchases by real estate investment trusts and other private equity groups, foreclosures and sales of distressed loan portfolios by national lenders, and borrower refinancing, said Crocker, adding that multi-family and retail properties are attracting the most interest from buyers.