Digging Deeper: Why Site Assessments Are A Vital Step In Industrial Property Purchases
Acquiring an industrial site can be a lucrative opportunity for investors, especially if it can be transformed into a space that benefits both the community and their bottom line.
Some industrial sites, however, come with a history of contamination by pollutants such as PFAS, a class of chemicals that can be found in water, air and soil. It is a persistent group of chemicals that doesn’t break down easily, and is potentially hazardous to both humans and animals, even at very low concentrations.
All of this means that before investors purchase an industrial property, they need to perform due diligence. If they don’t, they may miss environmental issues and evidence of noncompliance that could turn their latest purchase into a dangerous money pit, said Eric Cooper, senior vice president of legacy site services at RPS Group, a global professional services firm that helps clients with navigating several CRE-related challenges, including environmental issues.
“Investors need to be asking questions such as, ‘Is the company that is currently operating the property in good standing with regulators?’ and, ‘What was the nature of operations for historical tenants and occupants?’” Cooper said. “These questions have to be answered as thoroughly as possible for the investor to make an informed decision.”
Cooper said that this process will help potential investors develop a deeper understanding of the site’s environmental risk factors; in particular, how much time and money these investigation and remediation efforts could require.
He said that an increasingly common contamination issue includes vapor intrusion, a process where volatile chemicals released from the ground migrate into building air spaces. This is typically found on manufacturing and industrial sites, where prior investigations and remedial actions may have been completed before regulations were put into place to address this kind of pollution.
“Employee exposure is a real concern when it comes to vapor intrusion because it can result in costly litigation and reputational risks,” Cooper said. “But the good news is that methods for identifying the conditions as well as mitigation and remediation are well-established.”
PFAS, however, are an especially difficult class of chemicals to remediate, Cooper said. Since they are labeled "emerging contaminants," there are still questions about how they are regulated. Cooper said that, unlike most contaminants, which can be removed from the site and taken to a facility to be disposed of or incinerated, PFAS pose an extra challenge, since they don't break down easily. He said current technologies are limited in their ability to remove or treat PFAS.
Despite these challenges, with the passing of the infrastructure bill in November 2021, $10B has been put toward lowering the presence of PFAS in water. At the moment, Cooper said, there may be ways to catch and filter out the impacted drinking water and reduce people’s potential exposure.
Building owners can put a deed restriction on the property to halt groundwater use at the site and cut off the potential for exposure. They can also install a groundwater treatment system on-site to try and filter out some of these chemicals.
While the research to fully get rid of PFAS is still in the works, Cooper said that RPS Group strives to be transparent with clients about any obstacles that may come up during the investment process.
“We do not try to skirt the issue but really highlight it for our clients,” Cooper said. “We tell them, ‘There are the limitations for remediating PFAS, but there are still approaches to addressing this.’ We explain how much time and money it would take and what the implications of future regulations may be.”
Cooper recommended that clients work with consultants from the very beginning, before they even purchase a property, to help assess environmental risks.
“We would build out multiple scenarios with the best, moderate and worst-case scenarios, and show them what the risk looks like in terms of dollar spend and how long it will take to do the remediation,” Cooper said. “It really helps stakeholders understand the monetary risk and anticipated spending over time.”
Even after the property is purchased, Cooper added, the buyer can protect their investment by continuing to work with an environmental consultant. That way, they can ensure that their business is able to minimize the risk of releases and closely monitor any investigation or cleanup. Also, the site operator can stay on top of any changes in regulations.
“A good consultant can identify historical issues, effectively mitigate those risks and establish a go-forward failsafe system despite any disruptions that may occur,” Cooper said. “We’re here to help clients manage a situation quickly and effectively in real time.”
This article was produced in collaboration between RPS Group and Studio B. Bisnow news staff was not involved in the production of this content.
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