The e-commerce industry’s appetite for warehouse space near major cities is boosting demand for brownfields as well as environmental insurance.
The trend is especially strong in New Jersey, where more than 50 percent of brownfields redevelopment projects are leased for online retail uses, according to commercial real estate firm Jones Lang LaSalle Inc. Other companies investing in brownfields for e-commerce include FedEx Corp., Under Armour Inc., and Wal-Mart Stores Inc.
With the increased demand for brownfields—which often are former industrial or commercial sites with environmental contamination—sites get cleaned up more quickly and can promote local economic growth.
“The demand has never been as high as it’s been today,” said Robert Kossar, who manages New Jersey operations for Jones Lang LaSalle Inc.
The same is true in other major metropolitan areas, according to Dan French, who is the chief executive officer of Brownfields Listings, which runs an online bulletin board for brownfields sites open for redevelopment and developers looking for sites.
He told Bloomberg BNA the current demand for warehouse space is “historic.”
“Land availability is getting tight in well developed locations, like, say, the I-55 corridor here in Chicagoland, but the demand for space just keeps growing,” French said, referring to the Chicago metropolitan area. “The consumer isn’t slowing down and neither is e-commerce growth, so the buildup will go on.”
Growing Insurance Demand
The demand for environmental insurance also has grown in the first half of 2017, said Glynis Priester, national practice leader in the environmental sector at Wells Fargo.
“On the growth front it is kind of a buyer’s market, which I think is helping to drive new customers to buying environmental insurance,” Priester told Bloomberg BNA. But there is strong interest in New Jersey from clients who are developing brownfields sites into warehouse space and need insurance coverage for environmental liabilities, Priester said.
“We are seeing a lot of developers who, in the past, really didn’t have an appetite to acquire properties that were distressed, or saw a lot of contamination,” she said. The high demand for real estate has turned that perspective around, despite the increased price of redeveloping a brownfield.
“Because there is such a dearth of available land, and because of the expense of that land, brownfield redevelopment has been the only means of redevelopment for this entire cycle,” Kossar told Bloomberg BNA.
Ultimately, French said, brownfields benefit.
“The long-term trends are in place, industrial rents are [higher],” he said, “and it’s great news for brownfield sites.”
Investing in Brownfields
FedEx and Under Armour have signed leases to build distribution centers at the former Bethlehem Steel mill complex outside Baltimore.
Testing at the former steel mill showed the presence of lead, semi-volatile organic compounds, and polychlorinated biphenyls, among other contaminants. Cleanup efforts are proceeding under Maryland’s voluntary cleanup program.
Offshore contamination near the site is being remediated under the Comprehensive Environmental Response, Compensation, and Liability Act, according to Maryland state documents.
According to Jones Lang LaSalle, the incentives for building at that site include a 10-year property tax credit, employment and job tax credits for being in the Chesapeake Enterprise Zone, and incentives from the regional power company.
FedEx chose the brownfield site “primarily because of its ease of access to major highways, proximity to customers’ distribution centers and a strong local community workforce for recruiting employees,” Meredith Heighington Miller, a spokeswoman for the company, said.
Under Armour referred Bloomberg BNA questions about the site to the developer.
French pushes brownfield owners in less popular markets to make their sites more appealing by preparing their sites for developers to start their work as soon as possible.
“If significant environmental issues need to be resolved, or a brownfield is early in the redevelopment process and not much information is known, then it can take longer than [developers] can afford to wait,” he said.
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Source: BNS EHS