Phase I environmental site assessments are a standard pre-closing activity for many commercial real estate transactions, EDR notes--thus its data can be considered a leading indicator of the general health of the real estate market. The caveat to this derivation is that Phase I environmental site assessments are also conducted for foreclosures. To examine DC, therefore, two factors come into play:
- The report finds that Phase I ESA activity in DC measured a 46% growth rate this past quarter--the highest of all US cities;
- The DC area has not seen that many foreclosures yet.
The Northeast was the only region to register positive quarter on quarter performance at 11%. Regionally, the slump in Phase I ESA volume was steepest in the Western region, which experienced a 25% decline in activity. Q4 is not shaping up to be any better. In October--a month seen as a bellwether for activity for the rest of the year--preliminary ScoreKeeper results registered a 21% decline, which means the market could be in for a rough close to 2008, Crocker says.
"While the impact of the credit crunch first manifested itself on the residential side, it is now having a dramatic impact on commercial real estate," she says. "Virtually no region is unaffected by the financial crisis." According to ScoreKeeper, the fastest-growing metros after Washington, DC were Boston at 40%; and Inland Empire, CA, at 28%; while Oklahoma City saw a 44% contraction.
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