Michigan Industrial Growth and Development – Environmental Due Diligence Considerations

Michigan has enjoyed commercial real estate revitalization and growth throughout the state, largely owing to the rise of venture capital, business growth, and revitalization. Demand for industrial buildings has been high, due to unavailability of open space and high occupancy rates. The “rebirth” and re-development of Detroit has been well documented. There are currently 12 major development projects in the heart of Detroit, building on major renovations of derelict apartment buildings, crumbling Victorian buildings, and initiatives that encourage businesses and residents to invest in Detroit.  Accelerating the pace of attracting residents, entrepreneurs, and high-end talent is the addition of the Q-Line along Woodward Avenue from Downtown to New Center, as well as a community bike share.

But the rest of Michigan is also experiencing an upturn. West Michigan is showing steady commercial real estate market growth, with a 10.8% increase in transactions year over year. The West Michigan industrial sector is one of the tightest markets in the state, with vacancy rates at only 5%. Brokers sold 2.4 million square feet of industrial space regionwide. Aerospace manufacturer Jedco is expanding their 110,000-square foot facility in Grand Rapids. The demolition of an old industrial site in Ann Arbor is making way for new condos, along with a brownfield cleanup of site contamination. Saginaw will also be catalyzing redevelopment efforts with the cleanup of four major historic brownfield sites.

Last year, my colleague Suzi Rosen wrote about the growing possibility of more stringent Michigan vapor intrusion regulations, even on previously ‘closed’ sites. This would include comprehensive standards to evaluate and mitigate properties potentially contaminated by vapor intrusion. The Michigan Department of Environmental Quality is continuing to develop a calculator for site-specific criteria that models the risk and toxicity equations that serve as the basis of these regulations. Until then, property owners and developers would best be served by engaging the services of a knowledgeable, skilled environmental due diligence professional to help them review their need for a Baseline Environmental Assessment, any ongoing Due Care Obligations, and all proper environmental due diligence services for transactions involving new properties and developments.  Existing property owners would also benefit by having a local due diligence consultant review their existing due care obligations, since even though the property use or condition may not have changed, the changes in how the MDEQ looks at vapor intrusion could mean they now need to do more to remain in compliance.

In Michigan, Due Care Obligations are a series of actions a property owner of a contaminated property must undertake to protect occupants of their property and the population at large from exposure to contamination in soil, groundwater, and subsurface vapors. The DEQ Due Care Guide outlines the purpose of due care and obligations for property owners, depending on the use of the site and the extent of the contamination. This is especially relevant for current commercial real estate trends in Michigan, which include repurposing of old industrial sites to office, residential and mixed-use developments, cleanup of Brownfield sites, and digging up sites of already existing spaces to expand developments or install basements. In these cases, there is the risk of potential exposure to contamination, and therefore a liability for potential and existing property owners. Choose a local due diligence consultant who knows the unique nuances of environmental due diligence in Michigan, as well as the necessary compliance regulations to ensure that your transaction is successful.