In collaboration with GlobeSt.com, Partner ESI recently conducted a survey to assess the commercial real estate industry’s tolerance for environmental risks. Close to 250 CRE professionals answered questions about their perception of environmental issues, and how their organizations manage this risk.
How often does an environmental issue really impact CRE deals, and how does this affect viability or return on investment? What does the industry consider to be deal-killing environmental concerns? When and how are ‘workarounds’ deemed appropriate? And, how has the industry’s perception of environmental risk changed since the recession?
The survey showed that the CRE industry is taking environmental risk seriously, and for good reason! 77% of respondents said they have seen a deal fall apart because of it. But importantly, it doesn’t have hurt your bottom line: many respondents showed a willingness to take on a certain level of well-understood environmental risk. For example, 86% of respondents said they would be willing to move forward with environmentally complicated deals if the finances and/or cleanup arrangements can be addressed. Partner’s Technical Director for Subsurface Investigation Kristine MacWilliams comments that in today’s competitive CRE landscape, there “(…) seems to be a healthy respect for, but not irrational fear of, a ‘bottomless environmental pit’. The key is quantifying the problem and gaining consensus on the deal economics.”
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