Investors pumped $2.6 billion more into properties covered by the federal Opportunity Zone tax incentive initiative — an 8 percent increase from the same time last year — even before the Treasury Department released guidelines on the program.
Almost 40,000 properties in the more than 8,760 zones in the national and Philadelphia commercial real estate market have sold this year, according to CoStar data. More than 51,400 properties are being actively marketed for sale, and the release this month of the first round of regulations is expected to amplify that flow of money through the next couple of years.
This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Opportunity Zone investments are a provision of the Tax Cuts and Jobs Act signed into law last December, deferring or eliminating capital gains taxes for new investments throughout the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – in communities that state and federal officials define as economically distressed. The Treasury worked into October this year to provide regulatory guidelines for the program.
Estimates range widely for the amount of capital that could flow into national and Philadelphia commercial real estate properties to take advantage of the tax benefits from investing in properties in these zones and holding onto them for at least 10 years. The federal government calculates the capital flow at $100 billion, while some industry estimates reach as high as $250 billion — and it could go higher if all benefits are factored in.
Not every property in a zone is eligible for tax benefits. To qualify, investment buyers must double the value of the investment in a specific time frame. Many zone properties among U.S. and Philadelphia commercial real estate listings, however, are newly constructed or not in need of new development or redevelopment. Nonetheless, these properties could also see an upswing in investment.
Other investors in the U.S. commercial real estate market, including Philly office space, Philly retail space and Philly industrial space, will be pumping money directly into businesses in the opportunity zones –- investments that are also eligible for the tax benefits.
This early activity this year tallied by CoStar may provide a clue to where the expected surge of money could flow into national and Philadelphia commercial real estate listings and for what property types. In CoStar’s analysis of this year’s opportunity zone sales, it excluded properties that were part of portfolio sales of $100 million or more, and that were targeting large national or regional portfolios and not specifically opportunity zone properties.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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