Multifamily Appears Most Popular For Opportunity Zone Investments
January 17, 2019 | Tanya Sterling | GlobeSt.com
The Opportunity Zone program could be successful at increasing housing development in certain areas, though whether this will include more affordable housing is not clear and will vary from metro to metro. Significant investments in these areas should help trigger and sustain economic development as the program offers greater incentives for longer investment periods.
“The Opportunity Zone program appears to be attracting significant amounts of capital, and many investors we have spoken to have mentioned multifamily as perhaps the best property segment for investment under the program,” says Cory Loviglio, Quantitative Strategist, Ten-X Research. “However it remains to be seen how much affordable housing this program will actually provide.” In many cities, he explains, adding affordable housing is a challenge closely tied to elevated construction costs, specifically related to the rising cost of materials and labor, not just land or taxes. And in more rural areas, there already tend to be fewer apartment buildings so it appears less likely that they will be inserted into spaces dominated by single-family housing. “Nonetheless, the program should add to housing stock judging by the attention it has already drawn from investors, specifically those with multifamily interest,” he says.
The investment activity in Opportunity Zones will likely depend on various criteria set forth by investors that do not necessarily apply to economic distress levels. Factors include risk profiles, geographic preferences, real estate sector preferences, and time horizon. These factors will inevitably lead to some opportunity zones drawing significantly greater investment and development than others, as based on the criteria, some are better suited for investment, Loviglio tells GlobeSt.com.
The time (at Blue Vault's 2nd Annual Broker Dealer Educational Summit) proved extremely informative.