US Opportunity Zones: A Baseline

In the U.S., the newly-designated “opportunity zones” account for 10% of the investable universe and have averaged $50 billion in annual acquisition volume in recent years, a new report from Real Capital Analytics shows. Analysis in US Opportunity Zones: A Baseline reveals that a significant amount of development was already occurring in these designated zones and that pricing of properties in the zones has largely tracked pricing of properties located outside of these areas.

Billions of dollars of tax-incentivized capital is expected to flow into these 9,000 zones, which were introduced through tax reform legislation in December 2017 with the aim of spurring economic activity. An initial impact of the opportunity zone plan is evident in a spike of land sales, the new report highlights. As more details of the plan were finalized over the summer of 2018, the momentum of these development site sales accelerated.

Key report findings:

–Price trends of properties located in opportunity zones have in general tracked the overall market in the past 15 years, according to RCA price indicators

–A discount on properties in opportunity zones is more notable on a price per unit basis, with office, retail, seniors housing & care, and hotel properties showing the largest discount

–The NYC Boroughs, Los Angeles and Phoenix may prove to be the most active markets for opportunity zone funds given their larger market size and their relatively high proportion of opportunity zones

–Ownership of properties located in opportunity zones largely mirrors that of the market overall, with private, mostly local, investors owning the majority of the properties

–Development site sales in opportunity zones have surged, but across other property types no significant differences are yet seen in sales or development trends

RCA clients can download US Opportunity Zones: A Baseline from the RCA website and can also search for properties located in opportunity zones.

Readers who are not already clients can download a copy of US Opportunity Zones: A Baseline by visiting this page.

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