Quarterly Newsletter Q4 2024

Investment Volume Stabilizes

According to CBRE Research, commercial real estate investment volume stabilized at $90 billion in Q3, reflecting a modest 2% decline year-over-year compared to a sharp 49% drop during the same quarter last year (Fig. 1). The slight dip from Q2 was primarily due to limited entity-level transactions in Q3, totaling just $212 million. Over the trailing four quarters, investment volume decreased by 15% year-over-year to $351 billion, marking a slowdown in the trend of larger declines seen over the previous six quarters. Portfolio sales experienced significant growth, increasing by 33% year-over-year to $20 billion, while single-asset sales dipped marginally by 1% to $70 billion.

In Q3, multifamily properties remained the most active investment sector, with volume rising 5% year-over-year to $34 billion (Fig. 2). The industrial and logistics sector ranked second, recording $23 billion in investment volume, a 2% year-over-year decrease. Office investments increased 8% year-over-year to $13 billion, while retail investments fell 28% to $12 billion.

For the trailing four quarters ending in Q3 2024, New York led the market with $28.7 billion in investment volume, closely followed by Los Angeles at $28.6 billion, and Dallas-Ft. Worth at $18 billion (Fig. 3). Among the top 20 markets, South Florida posted the highest growth with a 4.2% increase, trailed by Boston (+2.3%), Philadelphia (+1.9%), and Greater Washington, D.C. (+1.4%).

Private investors dominated Q3 activity, accounting for 59% of the total investment volume, or $53 billion, representing an 8% decrease from the previous year (Fig. 4). Private investors were net buyers, whereas institutional, REIT, and cross-border investors were net sellers. Institutional investment volumes surged 26% year-over-year to $21 billion. However, REITs and public companies saw the steepest decline, down 44% to $5.3 billion, largely driven by last year’s merger between Global Net Lease and Necessity Retail REIT. After five consecutive quarters of declining inbound cross-border investments, Q3 recorded a modest 2% year-over-year increase to $3.9 billion.

Source: CBRE Research, Q3 2024

To view larger images and dive deeper into the data, click on the images above.

A new map provided by EPA illustrates which definition of “waters of the United States” (WOTUS) is being followed in each state following the Supreme Court’s 2023 decision in Sackett v. EPA. While EPA issued a final rulemaking amending the WOTUS rule to comply with Sackett, the question of when a body of water is subject to federal regulation under the Clean Water Act (CWA) remains uncertain due to pending litigation challenging both the content of the revised rule and EPA’s rulemaking procedure.

Currently, 24 states are implementing the WOTUS definition outlined in EPA’s January 2023 (pre-Sackett) rule, while 26 states interpret WOTUS according to the pre-2015 regulatory regime and the Sackett decision. EPA will update the map with current information as it becomes available. The map is for informational purposes only and has no legal implications.

The states and industry groups pursuing legal action argue that EPA undermined Sackett by failing to clearly define “relatively permanent” and “continuous surface connections.” Additionally, they claim that EPA’s decision not to provide a notice-and-comment period violates the Administrative Procedure Act. The outcomes of these legal challenges will have significant implications for the jurisdictional reach of the CWA and how states may interpret it.

You can listen to the ERIS podcast about the U.S. Supreme Court ruling in Sackett here.

EPA recently released a draft framework – the “Interim Framework for Advancing Consideration of Cumulative Impacts” – that provides guidance to agency employees on how to consider the “cumulative impacts” of pollution in their programmatic work and engage with local communities on those issues. The goal is to help regulators determine the sum of impacts from different types of environmental stressors on a community’s quality of life.

Guiding principles described in the framework include:

• Using cumulative impacts assessments to improve human health, quality of life, and the environment.
• Focusing on the disproportionate and adverse burden of cumulative impacts.
• Assessing and addressing cumulative impacts based on a “fit-for-purpose” approach.
• Engaging communities and incorporating their experience into assessments.
• Using available data and information to make decisions and act on those decisions.
• Operationalizing and integrating processes for considering and addressing cumulative impacts.

While environmental professionals can expect EPA to incorporate the framework into its decision-making processes, the framework is not a mandate. The agency says it will integrate cumulative impacts into its processes and programs “as appropriate, feasible, and consistent with applicable law.” Additionally, due to a permanent injunction issued by the U.S. District Court for the Western District of Louisiana on August 22, 2024, EPA will not require any cumulative impact requirements in Louisiana. Read more about EPA’s enforcement efforts, evolving environmental justice regulations, and best practices for environmental professionals in a recent ERIS Originals’ article.

EPA is accepting public comment on the draft framework until February 19, 2025.

The Environmental Protection Agency (EPA) has released a new report describing the progress made toward meeting the commitments outlined in the agency’s 2021 PFAS Strategic Roadmap. The roadmap describes actions EPA will take to safeguard communities from PFAS contamination and sets timelines for those goals.

Achievements included in this year’s report include:

• Establishing national PFAS drinking water standards,
• Designating PFOA and PFOS as Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) hazardous substances,
• Releasing updated interim guidance on destroying and disposing of PFAS and certain PFAS-containing materials, and
• Allocating more than $10 billion from the Bipartisan Infrastructure Law to address PFAS and other emerging contaminants in drinking water.

Last year’s progress report can be found here.

EPA should do more to address climate change-related risks to hundreds of hazardous waste facilities across the country, according to a November 14, 2024, report issued by the U.S. Government Accountability Office (GAO).

Specifically, the GAO found that more than 700 hazardous waste treatment, storage, and disposal (TSD) facilities (about 68 percent) are located in areas affected by climate change-related hazards, including flooding, wildfires, storm surge, and/or sea level rise. It is currently unclear whether EPA has authority under existing regulations to manage these climate risks.

While EPA has issued guidance on managing climate risks through facility permit requirements, agency officials have not provided training or technical assistance to help states and facilities implement this guidance, the GAO reports. In fact, some states and facilities may wait for clarifying regulations to ensure the Resource Conservation and Recovery Act (RCRA) legally permits such management actions. Additionally, EPA hasn’t taken any action on managing climate risks as part of compliance and enforcement efforts.

“By issuing guidance to regions, states, and facilities on how to manage climate risks, along with providing data, tools, and training, EPA could better ensure these risks are managed sufficiently and that regions, states, and facilities have the direction and information necessary to do so,” the GAO reports.

The Oregon Department of Environmental Quality (DEQ) proposed including PFOA and PFOS in the state's definition of hazardous substances after EPA added those two PFAS to the federal definition. The definition of hazardous substances is a fundamental part of the state’s contaminated sites cleanup program because DEQ has the authority to require investigation, removal, and remedial actions when listed hazardous substances are discovered on a property. Oregon’s Hazardous Substance Remedial Action rules at OAR 340-122-0115 reference the federal hazardous substances list as of the date the rule was last updated in 2006, and this amendment will align Oregon’s regulations with the current federal hazardous substances list, which was updated in May 2024. This amendment would not, by default, require action from responsible parties. Rather, DEQ would have the authority to require investigation, risk assessment, and remediation where necessary.

Recent comprehensive amendments to state regulations include substantive changes to the corrective action and remediation rules. The revised regulations require reporting for suspected and confirmed releases for aboveground and underground storage tanks, including when tests show a failure in the secondary containment systems. Similarly, in the remediation section, added provisions require more detailed reports. There are also amendments to the Tier 1 risk-based screening levels (RBSLs) table; most surficial soil values are updated, and all the BTEXN (a group of chemicals that includes benzene, toluene, ethylbenzene, xylene, and naphthalene compounds) now have RBSLs for soil vapor. There is also a newly added table subsection, Gasoline Additives, which lists four additional chemicals of concern. Other changes include the adoption and incorporation-by-reference of new professional standards (e.g., Association for Materials Protection and Performance and International Standardized Profile 0169), more stringent installer certification provisions, and the recodification and consolidation of the bulk-storage assessment rules. All the changes went into effect on January 1, 2025.

New Hampshire’s amended disclosure law now requires sellers and their agents to include PFAS (per- and polyfluoroalkyl substances) in the list of potential contaminants that must be disclosed before finalizing a property purchase and sale agreement. This mandate applies to all real property, including buildings, and also covers radon, arsenic, and lead. The PFAS disclosure is required for all real estate sales in New Hampshire, regardless of whether the specific property has been confirmed to be contaminated with PFAS. The statutorily prescribed notice gives basic information about the sources, warns buyers that PFAS have been detected in wells throughout the state at “levels that exceed federal and/or state advisories or standards,” and states that testing “by an accredited laboratory can measure PFAS levels and inform” on water filtration systems if needed. The changes became effective on January 1, 2025.

Thank you to STP ComplianceEHS for contributing the articles under State Developments in this edition.