Brownfield Investment

A brownfield (also known as “brown-field”) investment is when a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign direct investment.

The alternative to this is a greenfield investment, in which a new plant is constructed. The clear advantage of a brownfield investment strategy is that the buildings are already constructed. The costs and time of starting up may thus be greatly reduced and the buildings already up to code.

Brownfield land, however, may have been abandoned or left unused for good cause, such as pollution, soil contamination, or the presence of hazardous materials.

Brownfield investing covers both the purchase and the lease of existing facilities. At times, this approach may be preferable, as the structure already stands. Not only can it result in cost savings for the investing business, but it can also avoid certain steps that are required to build new facilities on empty lots, such as building permits and connecting utilities.

Brownfield sites may be found in unattractive locations, making it harder to develop for the public or employees. So if investors can’t be attracted, it won’t be able to sustain itself.

The term brownfield refers to the fact that the land itself may be contaminated by the prior activities that have taken place on the site, a side effect of which may be the lack of vegetation on the property. When a property owner has no intention of allowing further use of vacant brownfield property, it is referred to as a mothballed brownfield. Sites that are significantly contaminated, such as by extreme hazardous waste, are not considered to be brownfield properties.

Brownfield investing is common when a company looks toward a foreign direct investment (FDI) option. Often, a company considers facilities that are either no longer in use or are not running at full capacity as options for new or additional production.

The Environmental Protection Agency (EPA) has a program known as the “Brownfields and Land Revitalization Program” that seeks to revitalize land by providing grants and technical assistance.

While additional equipment may be required, or existing equipment may need to be modified, this can often be more cost-effective than building a new facility from the ground up. This is especially true in cases where the previous use is similar in nature to the new intended use.

The addition of new equipment is still considered part of a brownfield investment, while the addition of any new facilities to complete production do not qualify as brownfield. Instead, new facilities are considered greenfield investing.

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