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Capital Movement and Opportunity Zone Legislation
There has been a great deal of buzz and news about the Opportunity Zone program, since details were released in late 2017. The question, however, is whether the legislation is actually making a difference when it comes to capital flows toward the designated Opportunity Zones. According to research from Real Capital Analytics (RCA), the program is making a difference, with additional capital flowing to these zones.
RCA came to this conclusion by examining capital flows not just to the designated Opportunity Zones, but also to what the analysts dubbed “Also Rans.” Also Rans, much like their O-Zone counterparts, are also ripe for redevelopment, but were left behind. The RCA researchers examined sale of development sites and properties earmarked for redevelopment in three types of census tracts; the two mentioned above, and that which was deemed ineligible. The metrics determined that, in 2018, sales activities for development-oriented projects fell in the Also Ran areas, while increasing within the designated Opportunity Zones.
The researchers did inject notes of caution, one of which was that some of the development-related sales decline beginning in 2017 could have been due to a revamp of bank-lending standards for construction loans. Furthermore, the development-related sales volume in the Also Ran zones topped out at $8.4 billion over a 12-month period through Q1 2019. However, “the fact that development-related sales are growing in Designated Opportunity Zones, as such activity is shrinking in the Also Rans, is evidence that the program is not just a buzz item,” RCA noted.
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