COMMERCIAL PROPERTY DUE DILIGENCE BENCHMARK SURVEY: TOP INDUSTRY CHALLENGES

What are the biggest challenges you face as an environmental professional today?

How about the biggest challenges your clients face?

How do you feel about the current state of our market?

In this final installment of our series of results from the Commercial Property Due Diligence Benchmark Survey series, we tackle the industry’s greatest challenges.

The results dovetail well with a key theme at EDR’s PRISM conference in Austin, TX: Market pressures are bearing down on all facets of property underwriting. It is critical for any professionals supporting commercial real estate dealmaking to deliver data and anaysis as efficiently as possible. What environmental professionals shared in the benchmark survey mirrors observations that surfaced at PRISM, including:

  • Pressure on EPs to lower their fees is the biggest challenge today, followed closely by finding new business, forecasting and pressure for faster delivery time (see infographic below).

“Don’t get suckered in by ordering cheap Phase I ESA reports, because your liability could be unlimited. Make sure that the consultants you use are reputable.”

~Jeff Civins, Austin-based environmental attorney in comments at the EDR PRISM conference, May 11, 2016

“A well-written Phase I ESA report requires a lot more work than it did many years ago. There are often potential issues, like RECs or CRECs that are not easily discovered, that now require more research than what the budget allows.” ~ Benchmark survey respondent

“Mountains of data need to be reviewed, but the time spent does not reflect the project cost.” ~ Benchmark survey respondent

  • Old Phase Is are being subjected to new scrutiny under today’s risk management lens.

“Vapor intrusion issues that were not being addressed in due diligence years ago when a client had an original (i.e. 2005) Phase I done on the same property are creating problems in today’s deals.” ~Benchmark survey respondent

“My clients have a hard time dealing with unexpected environmental challenges that were not identified in prior, poor quality, cheap Phase Is.” ~Benchmark survey respondent

  • Technology is getting more attention as market pressures intensify.

“How can you do things faster and cheaper, and yet better than in the past? Using technology and data and increasing productivity will be part of the solution.” Michael Berman, former Chairman of the Mortgage Bankers Association in comments made at EDR’s PRISM conference, May 11, 2016

“Our clients are often competing to get the deal, so this in turn is putting pressure on consultants to provide quality reports, quickly and for less money.” ~Benchmark survey respondent

“Clients have a hard time understanding that a Phase I ESA is a research project that takes 30 hours. It’s not a 15-minute site visit where the report is generated before hopping in the car. It’s not a 1-day—or even 1-week–turn-around process.” ~Benchmark survey respondent

 

Benchmark-Challenges

FOR MORE INFORMATION

The full set of Part 5 survey results related to pricing can be found in the infographic below. These results were shared with Affiliate Members of the Environmental Bankers Association at its winter conference in Long Beach the week of January 18, 2016.

Part 1 contains benchmarks on:

Whether EPs are optimistic about Phase I ESA volume in 2016, and
Whether firms are adding to their Phase I ESA staff.

Part 2 answers these questions:

What’s the average TAT for a basic Phase I ESA today?
Is speed more important than price for winning projects?
Are firms charging for faster delivery? How much?

Part 3 answers these questions:

How are EPs handling incomplete data in their reports?
Are EPs’ clients asking for addendums if information is received after report delivery?
Are firms charging added fees for regulatory records reviews?

Part 4 answers these questions:
How often does a Phase I ESA proceed to a Phase II?
What types of issues are driving further investigation?
Are clients more risk averse than they were last year?

Part 5 contains the industry’s latest benchmarks on Phase I pricing in today’s competitive market environment.

ABOUT THE SURVEY

In November 2015, EDR Insight launched the Commercial Property Due Diligence Benchmark Survey. The survey closed on December 1, and the final survey sample included 528 environmental due diligence professionals representing 45 U.S. states and Puerto Rico.