Leveraging Big Data & Analytics to Revitalize Brownfields
We’ve all seen the dilapidated corner gas stations, shuttered factories, crumbling strip centers, vacant properties overrun with weeds and collecting garbage and discarded appliances – all are at the very least eyesores and, to varying degrees, often much worse. These vacant or underutilized “brownfield” properties are found everywhere, from the largest metropolitan urban centers to the smallest rural towns.
In addressing this issue, technology has not been effectively deployed to promote redevelopment of these sites and catalyze community revitalization. We find that the question around the use of technology and data in advancing the redevelopment of brownfields is twofold:
How can current and future technology advancements be applied to upgrade existing brownfield modeling tools? And then, how can those modeling tools be used to accelerate transformative, sustainable, and smart redevelopment and community revitalization?
Brownfields are sites that are vacant or underutilized due to environmental contamination, real or imagined. There are brownfields of some kind in virtually every city and town in the U.S., usually related to a gas station, dry cleaner, auto repair shop, car dealership or some other ubiquitous local business that once benefited the community it now burdens with environmental hazards or old buildings. Some brownfield sites are high-profile, with multiple interested and engaged external stakeholders, such as local government, residents and environmental groups, while others fly largely under the radar of stakeholders.
Brownfields are, with rare exceptions, a lose-lose proposition for ALL stakeholders involved – owners, would-be redevelopers, capital sources, local government, residents, and the overall communities in which they are located. Negative impacts to communities include:
- Illegal dumping on vacant and underutilized sites which costs cities hundreds of thousands of dollars to clean up annually ($800,000 annual taxpayer loss in Detroit)
- Substantial negative impact on the value of surrounding properties (Average of -11.4% in Milwaukee)
- Loss of an average of 66 full-time jobs for each undeveloped site (For every 50 sites, over 3,000 jobs are lost)
The EPA estimates the number of brownfields in the United States at 450,000. A big number, but not even close to reality. The General Accounting Office has estimated more than 1 million brownfield sites. Even the GAO’s number is low because it does not apply a number of key brownfield indicators. The most detailed study, conducted by the State of California, estimated more than 200,000 sites in California alone. Applying California’s metrics, the nationwide estimate would exceed 2 million sites. Other recognized brownfield experts have estimated the number of brownfields in the U.S. as high as 4.5 million. With new brownfield sites added regularly, as businesses close or jobs move overseas, there would seem to be little hope under the current paradigm of ever significantly reducing the total number.
Past Successes & Future Challenges
EPA launched its Brownfield Program in 1995, over 22 years ago. Since that time, there have been many advancements and improvements, such as changes in regulations to support BF development and creation of various government incentives (federal, state and local) to assist developers and communities. These advancements have served to update the tools available to serve interested parties working with brownfields.
The current tools have helped develop different models up to this point for repurposing brownfields and have facilitated many successful brownfield redevelopment projects – ranging from single sites of all sizes to multi-site, area-wide developments – that positively impacted, if not revitalized/often revitalizing, the communities in which they were located. For every successful redevelopment, however, there have been many more failures and missed/unrecognized opportunities.
Success Stories & Stakeholder Benefits
Brownfield redevelopment benefits ALL stakeholders involved – owners/sellers, buyers/developers, lenders, municipalities, residents and other stakeholders. EPA estimates that 117,000 brownfield sites have been redeveloped over past 10 years. Common elements of successful brownfield developments include:
- Good physical locations in primary markets
- Strong transportation characteristics (e.g., proximity to highway, rail, etc.)
- Interested and experienced buyers/developers
- Available debt financing or other capital sources
- Engaged and supportive external stakeholders
The Chicago Metropolitan Agency for Planning (CMAP) reported that in a nation-wide study, 64 communities saw a total of $233 million in local tax revenue from redeveloped brownfield properties. Brownfield development in Indiana, for example, produced the following substantial benefits for multiple community stakeholders:
- 177 redeveloped brownfields led to creation of 14,500 new jobs
- Return on Investment (ROI) for brownfield redevelopment was 9:1 for the Indiana Finance Authority - that is, for every $100,000 invested, $900,000 was returned
- The average property value of redeveloped brownfield sites increased 270% from $421,074 (pre-development) to $1,138,513 (post-development)
For every successful project, there are many more that failed or were not undertaken – sometimes tragically for communities – due to a wide variety of challenges, obstacles or outright impediments, including inexperienced developers who made critical errors in judgement along the way, insufficient financial resources, opposition from local government and other community stakeholders.
These sites create immense challenges for the owners, communities, regulators and other key stakeholders. In many cases, these properties are locked in their current state by what many stakeholders perceive as insurmountable barriers. Specifically, by disaggregated information, disjointed resources, and unclear channels of communication, all of which can be resolved with the effective application of technology and data analytics to supercharge a wide range of information, resources and capabilities that already exist, but are not being effectively deployed.
Unfortunately, the overall problem is likely to get worse before it gets better because most remaining brownfield sites are challenged with less attractive locations and site features, weak local or regional real estate markets, more substantial environmental problems, and the like. In a 2015 survey by Environmental Business Journal, brownfield redevelopers and consultants concluded that 80% of all sites were burdened with too many liabilities – environmental, financial and otherwise – to be redeveloped. Of the remaining 20%, the same group believed three-fourths of those sites would require government funding to redevelop, leaving only 5% with perceived sufficient upside to attract privately-financed development in the near-term.
Adding to the frustration of communities saddled with brownfields, the market – determined by developers, lenders, and political leaders – will avoid challenging sites, making poor decisions to develop “greenfields” instead, which results in costs to extend municipal infrastructure, increased commute times and vehicle emissions, loss of open space, and exodus of tax revenue. Conversely, numerous studies have shown that redevelopment of urban infill areas reduced vehicle emissions and storm water runoff while increasing property values and spurring investment in properties adjacent to redeveloped brownfields, bringing renewed hope to their communities.
Current Paradigm – Reactive & Constrained
Part of what makes the current paradigm reactive and inefficient is the vast and varied amount of information needed for successful brownfield redevelopment, and the current constraints on access to that information, along with the limited effective tools and resources. For example, if you were a City Manager in a town of 15,000 people in the rust belt, and your primary employer, who employed 3,000 people at a large industrial facility (known or suspected to have significant environmental impacts) was going bankrupt, you would need information, tools and resources to, among other things:
- Identify opportunities for other industrial users or developers to acquire the site and return it to productive use
- Identify and assess applicable financial incentives to support a reuse/redevelopment project
- Assess whether the property is upside-down (i.e., the environmental impacts at the property outweigh the value of the property) and, if so, the relative magnitude of the problem
- Determine if there are other parties (e.g., prior owners/operators) who might be viable targets for recovering a portion of the costs – possibly even ALL of the costs – to clean up the property for redevelopment and reuse
- Identify and help you communicate/collaborate with other stakeholders to proactively develop and execute a plan for getting the site back into productive reuse
- Assess what risk mitigation measures/strategies might be available to prospective buyers to help position the property for a new owner/operator
Corporate managers with a portfolio of surplus sites also face complex and challenging situations for which they will need a wide range of information, tools and resources to help identify, evaluate and pursue options for protectively divesting those assets. In other cases, stakeholders may need very focused and complex analytics to meet their specific needs and objectives. For instance, a developer who has gained experience with brownfields might want to pursue a particular site that they know or strongly suspect to have significant environmental problems, but not know where to obtain information critical to assess the risks and opportunities associated with that site.
Under the current model, while some or all of the information, tools and resources needed may be available in the market, they are difficult to identify, evaluate and access. There is no one-stop, cost-effective platform to obtain all of these things; rather, the process of trying to obtain the information can be extremely expensive, time-consuming and confusing.
Furthermore, the problems associated with the current paradigm are exacerbated in non-primary markets that have more significant known or potential environmental impacts and require access to a broader range of information, more complex risk/liability and financial analytics, and more active coordination and collaboration among internal and external stakeholders – which essentially describes the vast majority of the remaining brownfield sites – i.e., non-low-hanging fruit sites.
What if there were a way to provide each primary stakeholder what they needed to break through the barriers that restrict so many brownfields sites from being redeveloped, such that:
- Corporate sellers could get more comfortable exploring opportunities for protective divestment and obtaining market feedback without fear of opening Pandora’s box of risk and liability
- Buyers would be able to timely obtain reliable information to identify suitable sites, assess risk and develop financial proforma
- Municipalities would be able to affordably obtain relevant information needed to identify their “alpha sites,” best reuse options, and best-fit buyer/developer candidates
- All parties would be able to communicate, share information, collaborate, etc. in a much more efficient and user-friendly cloud interface environment
The New Paradigm – Proactive & Technology Driven
To promote transactions and redevelopment of more challenging brownfield sites, stakeholders will need a range of new tools, capabilities and resources, ideally provided in one integrated, multi-disciplined platform. Key components of a more proactive, purposeful platform would include:
- An ever-expanding centralized database of reliable, actionable information and data covering the most critical subject-matter areas to ensuring safe and speedy transactions and successful brownfield redevelopment projects: real estate, environmental, stakeholders, incentives, cost recovery and capital sources
- Advanced data analytics (descriptive, predictive and prescriptive) to support accurate, realistic assessment of the upside opportunity and downside risks, as well as the reasonably estimated costs of proceeding with a transaction or redevelopment project
- Cloud-based, user-driven interface that can be utilized by internal and external teams and accessed through various electronic devices
- Multi-disciplined, integrated team of best in class professionals who have knowledge, experience, and relationships with key stakeholders
- Real-time access to key data regarding real estate, environmental, incentives, and other key information as well as real-time communications, reports, and updates for both internal and external stakeholders
- Advanced GIS mapping capabilities with filters/layers specifically relevant to brownfield redevelopment and community revitalization issues
Under this new model, the impediments resulting from the current paradigm would be removed or sufficiently mitigated to allow projects to be completed or at least more realistically evaluated.
This can be done. These tools exist and will shift the paradigm from one of fear over opening Pandora’s Box to one of hopefulness over the opportunity provided by predictability and certainty. A technology-powered paradigm for brownfield redevelopment and community revitalization gives us this future.
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