As an industrial real estate broker for over 12 years, I have learned a few key tasks every seller of industrial real estate should undertake prior to marketing their property. Near the top of the list is having a qualified environmental consultant complete an environmental site assessment, commonly referred to as a Phase I. The reasons are numerous but the biggies are:
- Reveals seller’s potential environmental exposure, if any, prior to identifying a buyer. A seller can deal with any potential environmental concerns prior to entering into an escrow, avoiding potentially costly delays and escrow terminations.
- Gives the seller control of the environmental review process from the beginning of marketing its property. In most transactions, the first recent environmental review of a property being sold will be when the buyer’s consultant conducts an environmental site assessment while in escrow. In this scenario, the buyer, not the seller, has control of the process and the seller will be in a reactionary position to whatever concerns or recommendations are made by the buyer’s consultant.
- Makes the property more marketable and can lead to a higher sale prices in a shorter amount of time. Perhaps nothing turns away potential buyer faster than an environmental concern. A recent environmental site assessment showing no recommendations for further inquiry can put buyers at ease that they most likely will not encounter an environmental issue in their own investigations, saving them time and money. In some instances, an all-cash buyer may accept the seller’s environmental site assessment and therefore save the cost of conducting one themselves.
This list can also apply to a landlord as well. In fact, many Fortune 500 companies now require a recent environmental site assessment be performed prior to executing a lease.
Seller’s may take issue with the cost of conducting an environmental site assessment or its necessity since the buyer or its bank will often conduct one anyway. However, in my opinion this viewpoint often does not consider the points above. Unless the seller has conducted a recent environmental site assessment, it should always consider the performance of an environmental site assessment of their property before marketing to be a worthwhile investment and in the seller’s interest.