TORRANCE, CA-A 10.7% jump in demand for environmental property reports ordered during first-quarter 2012 is a sign to environmental consultants that the national real estate markets are well on the road to recovery. Property buyers and lenders nationally ordered 49,355 Phase I Environmental Site Assessments in the first quarter, as compared to 44,599 in the first quarter of 2011, according to Environmental Data Resources Inc., a recognized market monitor and information-services firm. Based on this increase in ESAs, experts say the nation should see stronger volumes in real estate transactions in the coming months.
“Generally, lenders and buyers hire firms such as Partner to do a Phase I ESA to clear the path to a loan financing a property sale,” says Joseph Derhake, president of Partner Engineering and Science Inc., an engineering consulting firm here that provides ESAs in support of commercial real estate transactions. “When we send more personnel out into the field to assess and test property, it means bankers and escrow officers are getting busier.”
Partner itself has performed 2,147 Phase I ESAs in the first quarter, an all-time record for the firm and an increase of 15.8% from a year ago. “Demand is up, and we are making efforts to capture market share,” Derhake says. “Sellers are meeting terms necessary for sale, and lenders are easing up a bit on financing.”
Interestingly, Derhake adds, Partner has seen increased demand from the commercial mortgage-backed securities segment.
“I can speak not only to my own volume, but also to the industry’s because we are all in touch to get this data out into the market,” Derhake tells GlobeSt.com. “When investors order these assessments, they are in the middle of transacting real estate one way or another.”
The three triggers for ordering Phase I ESAs are sale events, financing events and foreclosures—all of which Derhake says is good for the real estate industry. “All three of those events are positive for the market because they create transactional volume.”
Tracking ESAs is somewhat of a unique barometer of the industry’s health, but the metric is especially interesting during a downturn in the market when foreclosures are a significant part of the volume, Derhake adds. “Foreclosures have represented a significant percentage of our business for the last four years. There were periods when foreclosures were probably half of our business.”
According to EDR’s data on ESA’s ordered in first-quarter 2012 vs. first-quarter 2011, the 10 major metropolitan areas experiencing the strongest growth are spread out across the nation, indicating a generally improving national market. The major urban areas experiencing strongest growth include Salt Lake City, up 53%; Memphis, up 48%; Jacksonville, FL, 38%; Boston, 33%; and Kansas City, MO, 33%.
“I think that we are recovering,” Derhake concludes. “Volume is increasing, and anecdotally the second quarter is going to be even better, so we are on the upswing and on our way to recovery clearly.”
As GlobeSt.com previously reported, in November 2011 environmental consultants in the Western US reported a 10.4% increase in Phase I ESAs in third quarter, according to EDR. The area covered by the report includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington state and Wyoming. Also, in March of this year Partner held an open house of its new headquarters at 2154 Torrance Blvd. The new facility, just redeveloped, features solar panels, a green roof and energy efficient technologies, as GlobeSt.com exclusively reported.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
