EL SEGUNDO, CA-Environmental consultants in the Western US reported a 10.4% increase in Phase I environmental site assessments in the third quarter, according to Environmental Data Resources Inc., an information services firm. Although the concept may seem novel to some, the leap in Phase I assessments can be viewed as a “unique barometer” that commercial real estate is heating up, according Joseph P. Derhake, president of Partner Engineering and Science Inc., an environmental and engineering consulting firm.

The area covered by the report includes Alaska,  Arizona, California, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington state and Wyoming.

“Phase 1 activity is a good business indicator for real estate, just like new leasing deals, financing events and foreclosures,” he says.

Both lenders and buyers hire environmental consultants to perform Phase 1 tests prior to arranging financing for a sale, purchase or new construction. When Phase 1 activity starts to bubble, “property transactions are headed north,” according to Derhake.

Not surprisingly, more than half of Phase 1 activity occurred in California, with 6,578 tests, while leading all other states with an 18% year-over-year increase. 

Among cities, Austin, TX, led the nation with a 52% in Phase I tests year-over-year, while San Francisco was third highest with a 44% increase from the previous year. Other cities with notable increases in Phase I activity were Los Angeles (31% over third-quarter 2010), San Diego and Seattle (both 23%).

 Nationally, 48,826 environmental Phase 1 tests were reported in the third quarter, an increase of 7% from the same quarter in 2010, according to the environmental Data Resources.