"It was confusion and a slow rollout that has made it so that funds haven't met their fundraising goal expectations," Hayden said. Now, investors expect a turnaround in the second half of 2019. The most recent data from research company Reonomy show a dwindling share of investments going to the country's 8,700 OZs, but those numbers only go up to March, or just before the Treasury Department's second round of guidelines were released.
"Opportunity Zones are among the poorest areas of the country, with some of the lowest home prices. This should come as no surprise because the zones are designed to be in or alongside economically distressed neighborhoods," said Todd Teta, chief product officer with ATTOM Data Solutions. "But the differences between these and other areas in most parts of the nation are stark. The numbers provide key benchmarks for how much room there is for these areas to grow and how much new investment they need."
Drexel’s Metro Finance Lab director on how innovative Opportunity Zone leadership can bridge the divide between the haves and have-nots.
Many consumers no longer make decisions solely based on the product or service they are receiving, but also consider the principles and values of the organizations they are engaging. Companies are now more emboldened than ever to align themselves with social issues, promote partnerships with charities and herald their sustainability practices to differentiate themselves from the competition. While an emphasis on social responsibility is influencing how consumers want to spend their money, it’s also impacting where they invest their money.
In terms of the Midwest, the results of the OZ program have been mixed. In Cleveland, Realogy reports that the city has 14% of its commercial assets in Opportunity Zones, above the national average. Investment share in Opportunity Zones was decreasing until 2018, where it leveled off, leading to a slight increase in the first quarter of this year.
Market watchers are predicting $200 to $300 billion in investment in the nation’s 8,700-plus OZones. And federal rules have made it clear that green economy projects -- such as local power generation, microgrids, EV charging stations and energy storage -- are eligible for OZone investment.
Opportunity Zone neighborhoods like Long Island City, Downtown Brooklyn, and Gowanus are communities where private investment has already poured in, and seems poised to continue doing so even without the extra tax incentive - and as a result, they are expected to attract the majority of any Opportunity Zone investment that does happen. Our city does have neighborhoods that would benefit from the additional investment right now, but these aren’t them.
Opportunity zones have the potential to unlock an entirely new class of investors and bring high-tech, high-return AI companies to lower income communities in order to create jobs in and move capital to areas of poverty. For investors in startups focusing on advanced technology such as AI that might take decades to develop, exit or go public, opportunity zone investment provides an amazing, low-risk opportunity.
Real estate investors who want to maximize the return on investment from participating in the opportunity zone program will reap extra tax breaks if they finalize the transaction before the end of the year, but one expert is still urging they do their due diligence before rushing into the program.
Since the opportunity zone program was introduced, the flurry of investment activity that its architects foretold hasn’t materialized. In its place, an ecosystem of events, media, marketing and paid consultation has arisen and flourished -- an industry based on talking about opportunity zones rather than investing in them.