FEATURE ARTICLE, FEBRUARY 2007

ENVIRONMENTAL ISSUES & REDEVELOPMENT
Redevelopers face many challenges, including environmental ones, when reviving old real estate sites.
Daniel Holte

Redevelopers must address environmental concerns touching virtually all of the major environmental laws. Environmental contamination, permitting and compliance issues may all come into play at a redevelopment site. In addition to contamination issues, the assembly of a parcel large enough to meet the needs of a redevelopment has become more difficult because of the diminishing threat of eminent domain that is a result of recent court rulings and legislative actions. 

In general, the real estate industry has become more sophisticated in its response to issues of environmental concern to the public. At the same time, the public has become much more interested in green issues and conservation. So what are the environmental issues driving redevelopment? What will drive it in the future? How will redevelopment evolve to meet the changing market?

Greenfield Vs. Brownfield Redevelopment

A greenfield is a site on which no previous development has occurred. Developing a farm field is usually less expensive and simpler than developing an old industrial facility. Common greenfield complications include the environmental review process for larger developments, wetlands, and threatened and endangered species.  

Decreasing land supply may result in land prices increasing, which means two things: the need for more creativity in redeveloping less-than-perfect sites, and the need to factor site soil conditions into pre-purchase and redevelopment strategies. There is a high likelihood that an urban redevelopment site will have at least some issues with poor geotechnical soils (e.g. peat, urban fill or rubble) and/or environmental contamination.

A brownfield is a property that has been impacted or has been perceived to have been impacted by environmental contamination. The principal advantages of a brownfield redevelopment over a greenfield development are:

· Infrastructure costs are generally lower

· Location tends to be closer to urban centers and already established residences and employers

· Grants and/or public entities may be available to help defray some of the contamination remediation costs

Although major regulatory changes are unlikely, we can anticipate that state and federal governments will make enough incremental changes to force responsible businesses to get assistance from attorneys and environmental consulting firms. Pre-acquisition due diligence by investors, insurers and lenders is a major industry driver today and will likely remain so.

Future cost drivers for redevelopment sites will also include:

· Higher disposal costs at landfills

· More scrutiny by regulators and property owners of the origin and disposition of soil moved from site to site

· Greater insurance considerations caused by the increased availability and acceptance of environmental insurance

Emerging Development-related Environmental Issues

There are a few emerging environmental issues that may be significant to those involved in the development or redevelopment of property in the future.

The Green Wave

The practice of turning farmland into cul-de-sacs and big box retailers is at odds with the increasing public awareness of ecological issues including global warming, recreational and drinking water quality, and indoor air quality concerns. Politicians and businesses are listening to voters, customers and shareholders. Voters have been increasingly supporting environmentally related ballot measures, including open space initiatives that increase property taxes. The public’s perception of higher gasoline prices and increasing traffic congestion have already started to change the way people think about where they live, work and shop. Architectural firms now offer green design as one of their services.  The opportunities and threats to development that this green wave creates are numerous and only beginning to unfold.

Vapor Intrusion

The Environmental Protection Agency (EPA) and state environmental regulators have focused recently on the potentially harmful health impacts of people being exposed to vapors from buried contamination. Vapors tend to travel upward through tiny spaces within soil or rock. Vapor travel is complex and not completely understood, and environmental regulators currently do not have considerable experience with vapor intrusion issues. From a site acquisition or redevelopment perspective, this means the potential for more expense (such as investigation, vapor barriers installed beneath buildings or installation of ventilation systems) or more uncertainty as a result of regulators requiring vapor surveys when they do not really know what to do with the results.

Storm Water Management

Storm water runoff harms lakes and streams. With development creating more hard surfaces impervious to water infiltration, storm water runoff can overload natural flood control features. Currently, excavation sites of 1 acre or more require a Storm Water Pollution Prevention Plan (SWPPP) to be prepared and implemented. Some large cities have changed the method of calculating storm water run-off fees. The new fees are based on the amount of impervious surfaces rather than water usage. Credits for storm water mitigation measures, such as creating a retention pond, a green roof or a rain garden, can reduce storm water fees dramatically. Government and environmental regulators will likely continue the trend of imposing new and more expensive ways to help control flooding and improve lake and stream quality.                                

The environmental industry that started in the 1970s is not likely to disappear anytime soon. Successful developments and redevelopments will come to those that provide quality client service and exhibit technical competence fundamentals, and find creative ways to add value while tapping into the green wave in America.

Dan Holte is principal scientist with Minneapolis-based Braun Intertec Corporation.


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