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New Opportunity Zone Ranking Shows Some Tertiary Markets Have Investment Potential

A new opportunity zone ranking highlights how some small markets present as much economic opportunity as coastal U.S. cities, but the question remains if the capital-sensitive commercial real estate industry will take a tertiary market plunge anytime soon.

Biloxi, Miss., scored highly on the Opportunity Zone Index, a ranking system that measures opportunity zones on their economic potential.

“In general, opportunity zones have pushed investors to look for deals in a swath of the country where they wouldn’t have looked before,” Develop Advisors founder and CEO Steve Glickman said. “As there’s more and more pressure for opportunity zone funds to develop a pipeline of projects and businesses to invest in, they have to get beyond the core markets they’re in now and find those gems that other people aren’t seeing.”

Based on economic factors like population growth projection through 2023, unemployment rates and projected median household income and home value for 2023, Develop Advisors partnered with location intelligence firm Esri on the Opportunity Zones Index, which Glickman bills as the first comprehensive economic baseline for all opportunity zones.

Prior to founding his own company, Glickman was CEO of the bipartisan Economic Innovation Group, a research and policy organization that conceptualized the opportunity zone program. 

The program enables developers in designated low-income tracts across the country to defer, or even be exempt, from capital gains taxes depending on how long they hold onto the asset. But not all the nearly 8,000 U.S. opportunity zones garner the same investor buzz, and Glickman’s firm measured each tract to get a rank on economic opportunity of each. 

While the report's top-ranked metro areas show the most opportunity is still in development hot spots like top-ranked San Jose, California, Salt Lake City (4) and Denver (7), Glickman said it also reveals there are plenty OZ diamonds in the rough. The OZI metro ranking gives top-20 ranks to places like Ogden, Utah (14), Biloxi, Mississippi (16), and Reno, Nevada (19). 

Ogden is an hour north of Salt Lake City and is a gateway to several ski destinations. Biloxi is a gaming and fishing city 90 miles east of New Orleans. The overlooked areas rank highly because of their friendliness to outside investment, potential for better investor returns and overall economic fundamentals. 

“Most of the country doesn’t look like San Francisco, D.C., New York or Boston when it comes to access to capital,” Glickman said. “To have access to national-level capital is going to be what hopefully allows a lot of these communities to be aspirational in building for the next 10 years and create an environment in downtown CBDs and attract really talented people and businesses from the coasts.”

While he sees plenty of interest in top markets like San Francisco and New York, he also sees more capital than easily accessible deals. He anticipates that will nudge investors to opportunity zone projects in secondary and tertiary markets. Developers who make the pivot will find affordable markets with governing bodies more willing to expedite the planning and approval process, and that gives credence to places like Biloxi having a high OZI rank. 

“That’s what the program was meant to do, and this map can provide texture to cities,” Glickman said.

Ogden, Utah

Kansas City-based Polsinelli real estate attorney Korb Maxwell utilized the Opportunity Zone Index at Bisnow’s request and liked what he saw, particularly as the top-ranked opportunity zone markets aligned with areas he would like to see deals made.

While he doesn’t anticipate the OZI will ever replace underwriting, Maxwell called it a useful tool to determine where to focus an opportunity zone strategy and look outside the most familiar tracts for investment opportunities.

“What I’m confident on with tools like this is it is a great way to build market awareness, and that is going to lead to additional deals and people pushing capital,” Maxwell said.

Overcoming The Opportunity Zone Status Quo

In the meantime, developers and investors continue to focus on zones where they can underwrite a project.

“If the program takes hold, goes on for a number of years and is successful, the policy objective of getting more capital across more zones across the country is going to happen, but there needs to be patience,” Normandy Real Estate Partners founder Jeff Gronning said at Bisnow’s Boston Opportunity Zone Summit Wednesday morning. 

While Gronning recognizes the federal government may want to see capital deployed across all the nearly 8,000 U.S. opportunity zones, he expects the initial wave of deals will be focused on major urban areas with easier cost benefits. 

“The deal still has to underwrite,” he said.


Former U.S. Secretary of Housing and Urban Development Henry Cisneros isn’t so sure it will take long to see more deals in secondary markets. Having served under President Bill Clinton, Cisneros is now chairman and co-chief information officer at American Triple I Partners, a New York-based infrastructure private equity firm. He thinks political encouragement can nudge investors to the heartland and other smaller opportunity zones. 

“It’s true there is a critical mass of development capital and expertise to serve the biggest metro areas, but there are also very capable people across America and creative developers in places like Buffalo, Youngstown, [Ohio,] Cleveland, Boise and Omaha,” Cisneros said. “It’s in the country’s best interest to make sure a program like this reaches across the nation.”

The country’s best interests don’t necessarily mean changes to the commercial real estate underwriting playbook. It is natural for developers to pursue a lucrative project in a major market compared to a smaller project in a secondary market, and Cisneros understands their rationale.

But he also thinks this could be a big win for the Trump administration with critics who say the White House disregards neglected parts of the country. 

“As a former HUD secretary, if I was the Secretary of the Treasury today and was responsible for a program like this, I would argue on every soapbox at every opportunity I got and explain what [the opportunity zone program’s] purpose was, why it was created, what will be a success and how people who will contribute to its success will be highly regarded.”