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Report: O-Zone Tracts Experience Commercial Investment Decline
It’s no secret that the Opportunity Zone program was put into place to spur economic development by funneling capital into federally-designated, lower-income census tracts. It’s too soon to know whether the program is living up to its hype. However, a recent report issued by Reonomy noted that, among the top 50 metropolitan statistical areas (MSAs) listed by population, O-Zone-designated census tracts continue seeing a declining proportion of total commercial investments.
The Reonomy analysts said that, in 2009, 14.6% of commercial transaction activity in these MSAs took place in what are now designated Opportunity Zones. Ten years later, that share in O-Zone tracts had dropped to 10.5%, nationally. Furthermore, “the top 50 MSAs saw a much deeper decline from 2017-2018,” Reonomy said.
The Reonomy analysts list a few reasons for these metrics. The first was alluded to above — that the legislation is still in its early days and “has yet to have its intended impact on commercial investment.” However, the report noted, it could also be that the program is having more of an impact in more risk-averse markets, or that the program might only have an impact in the more distressed areas of already risk-averse markets.
The report also pointed out other interesting facts:
- Out of the 52+ million commercial assets in the United States, approximately 6.5 million lie within qualified Opportunity Zone census tracts. This means 12.6% of all commercial assets in the U.S. are located in O-Zones.
- Meanwhile, 11.8% of all commercial assets in the top 50 MSAs are in qualified Opportunity Zones, slightly below the national average.
- The multifamily sector has the highest total supply of assets in Opportunity Zones.
- The asset type with the highest percentage of its supply in O-Zones is mixed use (18.73%), followed by industrial (18.72%).
- Price acceleration of assets in Opportunity Zones, versus those in non-Opportunity Zones, was on the rise again in Q1 2019.
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