The Top Opportunity Zones in The United States
While there are Opportunity Zones in all 50 states, as well as Guam, Puerto Rico, the U.S. Virgin Islands, American Samoa, and Washington D.C., some areas are more promising than others. In this list, we review some of the Opportunity Zones with the greatest potential for economic growth, particularly for Opportunity Funds looking to invest the construction and/or rehabilitation of high-quality commercial and multifamily real estate.
Downtown and South Los Angeles
Downtown Los Angeles is one of the fastest growing areas in Southern California, itself one of the most powerful economic areas of the country. The Arts District, much of which is located in an Opportunity Zone, has seen a revival in recent years, with apartment complexes and retail developments alike increasing economic activity in an area that was once considered a victim of a massive population shift to the suburbs. In fact, between 2013 and 2018, real estate prices in Downtown LA and LA’s Art District increased by more than 30%, which means it could be an excellent time to invest here.
However, the Opportunity Zones program doesn’t just stand to benefit future developments in Los Angeles— it may also benefit currently planned developments; right now, more than 25% of multifamily units and almost 50% of commercial space is already located in QOZs. This means that, with a certain degree of restructuring and tax planning, developers can place these investments inside Opportunity Funds— thus taking advantage of their many perks.
Washington D.C.—Wards 5,6,7 and 8
While Washington D.C. has a reputation for being a high-crime city, it’s also located within the fifth largest metro area in the entire country, giving it a great potential for economic growth. In 2018, Washington D.C. Mayor Muriel Bowser nominated 25 census tracts as QOZs, all of which were approved by the Treasury Department. In addition, Washington D.C. is the country’s second largest office market for foreign capital, and while it’s true that many of the Opportunity Zone neighborhoods in D.C. are residential in nature, there are also ample opportunities for commercial development.
Miami-Dade County, Florida
Miami-Dade County has 68 Qualified Opportunity Zones, and, with Miami (and the entire South Florida area) being one of the most appealing places for real estate investing, it could be an ideal area for Opportunity Fund investing. While foreign investment in Miami may not be as hot as it once was, it’s still extremely high. In fact, between August 2017 and July 2018, foreign buyers purchased $22.9 billion in real estate in the Miami area. With gentrification creeping into many of the city’s neighborhoods, such as the acclaimed Wynwood area, Miami is a particularly promising market, especially for multifamily investors gearing their sights toward long-term appreciation.
It may also be important to note that foreign investors may also take advantage of the Opportunity Zones program— and many may wish to attempt to combine it with the EB-5 program, which allows eligible investors to receive permanent U.S. residency if they invest at least $500,000 in a job creating project in an eligible low-income area. Investors will only be able to utilize the full tax advantages of the Opportunity Zones program if they already have taxable gains in the U.S., but they can still eliminate their capital gains tax basis for any appreciation their investment makes while in an Opportunity Fund.
The Phoenix, Arizona Area
Right now, the Phoenix, Arizona area is one of the fastest growing economies in the U.S., with job growth in the area expected to exceed 48% in the next decade. In addition, the surrounding cities of Tempe, Chandler and Mesa are particularly high-growth areas which also happen to host several Opportunity Zones. Chandler, with a population of more than 250,000, is home to multiple corporate headquarters, including Orbital ATK, Microchip Technology, and InfusionSoft, as well as hosting large regional offices for banks like Wells-Fargo and Bank of America.
The Austin, Texas Area
Austin is the fastest growing large city in the United States, with a growth rate of more than 6% per year between 2011 and 2016, more than twice the national average. And, with 21 Qualified Opportunity Zones, Opportunity Fund investors have a wide variety of options to choose from. However, Opportunity Zone investors in Austin may need to work within city guidelines in order to seriously develop inside the city. In 2017, Austin Mayor Steve Adler convened an anti-displacement task force in order to combat the displacement of lower-income city residents, which means that city officials may not be predisposed toward developments that accelerate the area’s rate of gentrification. Instead, smart investors may wish to look toward affordable housing, including projects funded with the Low Income Housing Tax Credit (LIHTC).
New Orleans, Louisiana
While it may not be on most people’s investing agendas, New Orleans could be a diamond in the rough for Opportunity Zone investors, especially larger institutions who may wish to take advantage of the Historic Tax Credit (HTC) program. The HTC program allows investors to take a 20% tax credit against qualified rehabilitation expenses (QREs) of restoring a eligible historic buildings that will be put to income-generating commercial use. The downtown New Orleans area has multiple Opportunity Zones overlapping with National Register of Historic Places Historic Districts, which means that there are a wide swath of potential properties that Opportunity Fund managers could potentially acquire and rehabilitate.