Opportunity Zone Projects Gain More Clarity, Expected to Rise

February 19, 2020

Developers have been slow to take advantage of the tax benefits offered through the federal opportunity zone program. But analysts feel that it is about to change.

“We anticipate new ‘opportunity zone’ projects will begin to break ground more frequently,” Doug Ressler, director of business intelligence with Yardi Matrix, told the National Real Estate Investor.

Analysts say that many investors last year hesitated to invest in opportunity zone funds to buy and develop properties. Federal officials had not yet released the full rules of the program.

But in January, the U.S. Treasury released final guidance on opportunity zone investing, detailing more about the ins and outs of this tax incentive.

In the initial rollout of the opportunity zone program, part of the 2017 federal tax overhaul, there was not a lot of clarity, says Jonathan Squires, a director of real estate services at Cushman & Wakefield. “The U.S. Treasury keeps issuing guidelines and they are becoming clearer and clearer,” he told the National Real Estate Investor. “Now people know they can utilize the tax benefits and not get stuck having a failed fund.”

Multifamily investors poured $19.8 billion into opportunity zones last year. That is up 10.9% from 2018, according to data from CBRE. The apartment sector comprised nearly one-third of all opportunity zone activity last year, CBRE notes.

Still, it’s important for investors to consult tax experts “early and often” as they enter into opportunity zone projects, says George Entis, senior research analyst in the Glendale, Calif., office at CBRE Capital Markets. “There are a lot of details that are important for qualifying for tax benefits,” he notes.

Opportunity Zone Projects Seem to Be Finally Breaking Ground,” National Real Estate Investor (Feb. 18, 2020)