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Survey Says: While Opportunity Zones Will Reshape U.S. Cities, Many Low-Income Communities May Remain Overlooked

The results are in: The commercial real estate industry is largely optimistic about the possibilities of the Opportunity Zone program, and most are getting their ducks in a row to take advantage of it.

Bisnow surveyed 202 commercial real estate professionals — mostly owners, developers and brokers — to delve into how the industry is thinking about the program. 


Only 3.5% of respondents said they don't plan to try to capture some of the tax benefits of opportunity zones. Many are diving right in — 68.3% are already making plans in opportunity zones — while 22.7% of respondents are still trying to wrap their heads around the guidelines. Those with plans in opportunity zones span the spectrum. Some are investing in the hottest, largest markets like New York City and Los Angeles, while others are eyeing tertiary markets like Shreveport, Louisiana, and Huntsville, Alabama — each of which has just over 190,000 residents.

When professionals were asked whether they believe the program will be used as intended — to reshape U.S. cities and revitalize low-income, underdeveloped communities — their answers got a bit murkier.

More than half of the participants, 65.8%, believe opportunity zones will significantly reshape cities and revitalize blighted communities; 22.3% of respondents said they do not believe the program will bring any significant change to low-income communities; and the remaining 11.9% said they did not understand the program well enough to respond.


More telling than the figures above are the written responses received from respondents (48% of whom were developers). Most believe the program will result in a disproportionate amount of capital being invested into more popular zones that are already experiencing a surge of investor interest and development.

“By increasing capital flows to previously ignored areas, there is a high likelihood that those areas will benefit in the long run. However, it is important to note that capital will still be selective and flow first to the areas within the designated opportunity zones that have the most economic potential, regardless of the tax benefit,” a Chicago residential, multifamily and office developer wrote.

One Denver multifamily, hospitality and lodging developer was more skeptical: “This will fuel some developments that otherwise would not occur, thus helping revitalize certain communities. It will remain ‘haves' and ‘have nots’ though, as some communities will see significant investment and this may do nothing for others.”

The Qualified Opportunity Zone program, which allows taxpayers to funnel capital gains into opportunity funds that will invest in the revitalization of communities in designated opportunity zones in exchange for a tax break, was created to fuel investment and economic development in low-income communities. State officials have classified 8,700 opportunity zones across the country that account for areas that hold roughly 10% of the U.S. population

Billions of dollars in investment are expected to flow into opportunity funds despite the fact that finalized guidelines have yet to be released. 

The U.S. Department of the Treasury released preliminary Opportunity Zone program guidance in late October that addressed many, but not all, of the questions investors have sought guidance for in the months since the new tax law passed in 2017. Officials are accepting public comments on the new guidelines ahead of a public hearing planned for Jan. 10. 

A ‘Virtuous' Tool For Investment, Or 'Another Way For Developers To Reduce Tax Liability'

Urban Pacific Group's 538 Golden Ave. project is in a designated opportunity zone next to Cesar E. Chavez Park in Long Beach, Calif.

Several survey respondents were overwhelmingly positive about the impact of the program, with some positing it could lead to the development of more affordable and workforce housing. 

“First would come housing, retail and eventually infrastructure and other needed investments would follow to make [these] areas attractive developments. Directing development dollars in these areas would create a virtuous cycle of investment and progression,” a Washington, D.C., broker and finance consultant said.

A Boston banking and finance respondent compared the program to that of 1031 like-kind exchanges (investing through an opportunity fund, while fundamentally similar, can reach beyond real estate in deferring capital gains). The respondent said it could birth substantial capital for investment, particularly in underserved communities.

"I think this initiative comes at a time [when] affordable housing is becoming more prevalent and sought out by consumers. With the Federal Housing Administration up for restructuring and the unknowns of what will come of Fannie and Freddie in the future, these opportunity zone investment funds incentivize investors to allocate money towards underserved communities.”

The affordable housing crisis in the U.S. has reached new heights in markets all across the country, with housing developers grappling with high building costs and a labor shortage that has made it difficult to complete projects on time. Though the Opportunity Zone program has been optimistically received by many in the commercial real estate industry, some experts in the affordable housing space have raised concerns about the lack of guidance surrounding opportunity zones, particularly when it comes to affordability requirements and how that will impact residents in those designated areas. 

The majority of surveyed respondents expressed concerns about whether the program would benefit areas already experiencing a surge of development activity, leading to the bifurcation of investment in burgeoning neighborhoods already in high demand. 

“I believe investment will start in areas close to gentrification already in progress,” one respondent wrote.

Another stated, “It may help start a turnaround, but more time and money is needed, along with changed perception of the area being improved.”

Others expressed concerns that the tax break incentive to invest in blighted neighborhoods would not be enough to generate decent long-term returns on investments.

“The investment must still make [return on investment] sense for the long term in an area with upside, and just the tax break itself at the end of 10 years (or more) won’t be enough to entice investors to an area with little potential,” a Madison, Wisconsin, developer commented. 

A New York office consultant mirrored those sentiments, stating the large quantity of designated opportunity zones is the program’s downfall. 

“You could argue that there are too many opportunity zones covering too large an area for the designation to shift behavior. In NYC, the opportunity zones cover already-popular areas like Downtown Brooklyn, Red Hook, Long Island City, and the northern tip of Staten Island,” the developer wrote. “[It’s] hard to argue this isn't just another way for developers to reduce tax liability on investments they would have made anyway.”


Nearly 60% of those surveyed fall within the multifamily and residential sectors, 37% work in office markets, 36% in retail and nearly 31% in industrial. As for job titles, developers dominated the survey, accounting for 48% of all responses, followed by brokers (22.8%), consultants (20.3%) and professionals in the private equity space (14.9%).

We will be using data from this survey to inform reporting over the next few weeks and even months. Stay tuned!