The importance of an environmental assessment

November 21, 2019

Environmental site assessments, which involve identifying potential or existing environmental contamination liabilities, are one of the most critical steps in the due diligence process for a commercial real estate investment.

Below are a few reasons why it is incredibly valuable to compile accurate environmental reports for your potential investment:

1. Identify Environmental Risks: A major component of the due diligence process is to identify and assess the potential for environmental risk associated with the investment. Common environmental concerns are associated with Underground Storage Tanks, used for storing oil for heating purposes. These tanks may have been decommissioned over time, but it is necessary to identify if they still exist on the property and if they have leaked oil. Other causes for concern are gas stations and dry cleaners that may have operated on or near the site, which may have caused potential contamination.

2. Identify Hazardous Materials: Hazardous materials, such as asbestos, can be found anywhere from drywall compound to vinyl flooring, posing potential health risks when it is disturbed and becomes airborne, specifically during a renovation. It’s important to identify this for both health purposes and for any costs that would be associated with demolition & disposal if an investor is considering renovating the property.

3. Remediation & Risk Assessment: When you learn early on that you will have a higher cost associated with removing harmful contaminants on your property, you can budget accordingly to help remove your environmental risk & liability.