A few weeks ago I outlined the essence of EDR's strategy to attendees and the annual Parcel Users Conference and thought it would also be appropriate to do so again here for those who could not attend the event. In short, EDR is working hard to deliver value to clients and end users in three primary ways:

1. Content


2. Workflow Solutions


3. Community

It all starts with content which means making sure that EDR's database of properties remains the most comprehensive, dynamic and current in the nation. This database obviously includes the governmental records considered "standard" by the ASTM Standard. However, huge resources are devoted to developing valuable proprietary records that provide unique insight into a property's potential for contamination. These proprietary records include categories like historical gas station locations, historical dry cleaners and former manufactured gas plant sites and are made possible because of scanning and digitizing operations at multiple EDR research locations around the country. The next step in aggregating content involves providing the industry a platform upon which customers can create, save and share (if so desired) user generated content. In just the past few months, thousands of data points have been contributed to the community database by environmental professionals from across the country. If we are to learn from examples in adjacent industries, it is possible that within a few years, the number of user generated records may actually exceed those records provided by government agencies.

As critical as world-class content is, EDR is also focused on helping customers become more efficient and productive through various workflow solutions. These solutions include the Parcel report authoring platform, the EDR OnDemand service and new services to be introduced in the future. What they all share in common are characteristics that enhance the value of the underlying content and improve the user's experience so that measurable time, productivity and cost savings can be realized. Seamlessly integrating environmental content with multiple workflow services is the largest internal development effort underway at EDR and will likely remain so for the foreseeable future.

Finally, embracing the Web 2.0 world, both technically and culturally, is the third pillar of EDR's strategy. This means gradually evolving away from being a company that only "pushes" content to an audience down a one way street and towards becoming a participant in the world's premier community of property due diligence professionals. As a media and content company, our role is simply to help get the community off the ground and provide the technology platform upon which dialogue can occur. The community itself will be comprised of consulting firms, mortgage lenders, insurers, attorneys and others who care deeply about the property due diligence field. This blog itself is actually the first step towards building this community where information and ideas can be exchanged and conveyed in an open and transparent manner.

These are very exciting times and all of us at EDR are looking forward to the challenges that lie ahead.

While on vacation for the past two weeks I received a number of emails from clients asking for EDR's view into the state of the industry. Here is what we are seeing.

On a year-on-year basis, ESA transactions had been up by 3% through August. Then starting in September and running through October, things slowed down. For the past 6 weeks, the volume of ESA activity has declined by 14% compared to last year despite the fact that the total number of environmental consultants ordering from EDR has increased. So basically we're seeing fewer projects being performed by more firms. However, this is slightly deceptive and does not tell the entire story.

Nearly all of the transactional decline is coming from the CMBS sector of the market. Firms who specialize in portfolio securitization work for Wall Street are taking the entire hit right now and the situation is very similar to what we saw in 1998; the last time the CMBS market contracted. By contrast, the onesie-twosie balance sheet mortgage market continues to perform quite well and continues to show annual growth.

In 1998, the drivers for the CMBS decline were the Russian ruble crisis and overdevelopment in the commercial real estate market. Back then it took about one year for things to play out before volumes began to increase again. This time around, we don't have the problem with overdevelopment. Instead, the only driver seems to be the credit crunch which began in late summer. Based on conversations with firms who specialize in this area as well as with Wall Street firms, the general consensus is that the current slow down in portfolio work will not last as long. Many clients are reporting that they are already beginning bid on portfolio work again and expect to see some large projects come through in November and December.

As I mentioned in an earlier blog post, the current situation is being described not as a "real estate event" but instead as a "capital markets event". This comment is reflecting the fact that underlying commercial real estate fundamentals remain good so any decline in lending is the result of capital availability, upgraded underwriting standards and the ability for mortgages to be securitized.

Most of EDR's 6,000-plus clients do not work for Wall Street so they should not be seeing much of an impact in work volume. However, those few that do are clearly weathering a bit of a storm right now. Hopefully this period will pass relatively quickly.