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March 10, 2017

CALIFORNIA: Challenging Climate

Commercial Property Executive

Q: How are regulators approaching contamination issues in Los Angeles and California in general?

Jon Reno, SIOR, CCIM, managing partner & senior vice president, Kidder Mathews, Commerce, Calif.: We are seeing regulators (raising) significant and overwhelming concerns over perceived risks of vapor intrusion from carcinogenic compounds, typically VOCs or volatile organic compounds, in soil or groundwater.

The U.S. Environmental Protection Agency has identified screening levels to (determine) whether concentrations of various contaminants are of concern. California's Department of Toxic Substances has typically established even more conservative levels for many compounds, such as perchloroethylene (PCE) and trichloroethylene (TCE), commonly associated with industrial degreasing and dry cleaning.

Q: How would you characterize the process?

Reno: It has been extremely challenging. The screening levels have been moving over the past 10 years as regulators reconsider risks, typically to a more conservative position, and new levels appear to be forthcoming shortly.

Q: What technological advancements are you seeing to help accelerate cleanups?

Reno: Vapor extraction and excavation still remain the primary focus of remedial action to clean up soils. Excavation can be quite costly... with deep contamination, and issues of vapor intrusion can remain. Vapor extraction, therefore, is a good and proven method of removing volatile contaminants while also allowing use of a property to continue.

Many developers are also utilizing sub-slab vapor barriers for new construction to... keep VOCs from rising up into the occupied space. Such a barrier can be very effective for lower-risk sites and presumed longer-term mitigation of liability.

Q: Repurposing industrial sites to highest and best use such as office, retail and work-live places a higher burden on cleanup, yet this trend continues across major markets. Thoughts?

Reno: This is a major trend occurring in downtown Los Angeles. Often the cleanup costs are factored into the final purchase price, or other arrangements can be worked out between buyer and seller. The important consideration is that cleanup/screening levels are more conservative for residential sites than for commercial/industrial sites.

This can be significant for sites that have been remediated and closed based on a commercial/industrial use, but can then be reopened for additional review or actions based on the new use. Most closure letters in the recent past have included language requiring a notification if the use changes. Given the regulatory concern over vapor intrusion, site design can be critical in determining what actions may be required.

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