Major thanks to Reonomy for granting my wish to write a special piece for me about opportunity zones in areas near and dear to me; Chicago and Las Vegas. For those who do not know, I am from Chicago and now live in Las Vegas. Thank you Patrick Rafferty for hitting it out of the park for me. I am really enjoying working with the Reonomy team and I am so impressed with their data!Linda Day Harrison, Founder of theBrokerList.com
The commercial real estate industry has been buzzing with excitement about Opportunity Zones ever since Congress passed the 2017 Tax Cuts and Jobs Act. Created to stimulate long-term investment and growth in distressed, low-income American communities, Opportunity Zones offer tax breaks on capital gains to investors and developers who make substantial improvements to an asset. With over $6 trillion in unrealized capital gains in the United States, the market for reinvestment is massive– especially in primary markets like Las Vegas and Chicago, where supply is ample and investment appetites are large. A spike in demand for Opportunity Zone investment has driven sophisticated funds to take advantage of this trend early on, but as more investors hop on the bandwagon, the competition to find the next high-yielding investment will only stiffen– especially in major markets like Las Vegas and Chicago.The competition to find the next high-yielding investment will only stiffen– especially in major markets like Las Vegas and Chicago. @reonomy Click To Tweet
With demand for Opportunity Zone investments so high, using information from listings sites and examining properties listed for sale will no longer be enough to differentiate from the competition. Instead, harnessing off-market data, which encompasses the entire universe of commercial properties, will become an imperative component to deal-sourcing– especially for investors targeting Opportunity Zone properties.
Vacant Land Opportunities in Vegas
The potential for Opportunity Zone investment in Las Vegas is undeniable. Nevada has 61 designated Opportunity Zones, 42 of which are located in Clark County, which covers over 11,000 Opportunity Zone properties and parcels of land. Of these 11,000 assets, approximately 30 percent are classified as vacant land. In the past year, over 2,300 vacant land transactions occurred in Clark County, totaling over 25 billion in sales. This healthy deal volume is a promising factor interested parties can take into account when considering potential development projects. Steady economic and population growth combined with an ample number of vacant land properties within Clark County Opportunity Zones indicate significant development and investment potential for vacant land parcels in Las Vegas.
Multifamily Opportunity Calling in Chicago
Of the 327 Illinois census tracts designated as Opportunity Zones, 133 are located within Cook County, where Chicago is located. Cook County is home to more than 100,000 Opportunity Zone assets. Over one-third of these Opportunity Zone assets are multifamily properties located in struggling neighborhoods such as Englewood, West Garfield Park, and Grand Crossing. According to Reonomy data, multifamily properties in Cook County experienced promising deal volume in 2018. Over X multifamily sales took place averaging around X per deal.
In recent years, the Chicago metro area has experienced considerable growth in its apartment market. According to RealPage, builders completed construction on 10,545 multifamily units last year. This year alone, Chicago faced a big year of building, expecting to clear around 12,000 by the end of 2018– a testament to Chicago’s potential for commercial real estate development within Opportunity Zones. The Chicago metro area experienced a population decrease last year, which on the surface, does not look auspicious for multifamily investment. Despite this outward movement from Chicago, the 36,000 multifamily Opportunity Zone properties present an opportunity for developers to create more affordable housing for Cook County residents.
Off-Market Data is Imperative
In the past, commercial real estate data was closely guarded by dominant players in major metro markets. Consequently, smaller mom and pop shops in these larger markets had to dedicate a significant amount of time and resources, sifting through huge amounts of publicly available data, rendering the deal-making process inefficient and slow. Thankfully, in the age of digital disruption, conducting research and due diligence is no longer so tedious and expensive. The advent of off-market data aggregation tools has brought in a new era of deal-making, saving stakeholders time and money– especially in primary markets like Las Vegas and Chicago.Harnessing off-market data, which encompasses the entire universe of commercial properties, will become an imperative component to deal-sourcing– especially for investors targeting Opportunity Zone properties. @reonomy Click To Tweet
The emergence of these tools bodes well for the commercial real estate industry– especially for those searching for Opportunity Zone investments in large metropolitan areas. Listing sites can be a good place to begin searching for target acquisitions, but this offers a myopic view, at best, of a market. So why make life more difficult by limiting your possible investment options? The solution to this lies in leveraging off-market data sources.
Simply put, off-market properties cover all commercial real estate that is not publicly listed for sale. Since there are only a set number of properties listed for sale at a given time, the scope of off-market properties is considerably larger. Data aggregation platforms like Reonomy offer easy access to market information, which provides an unobstructed view of a market, thereby allowing for more insightful decision-making. Search filters also enable commercial real estate professionals to pinpoint specific properties within Opportunity Zones and obtain property owner contact information– which is especially valuable when researching in major markets like Las Vegas or Chicago. Having access to owner contact information is especially advantageous for those who want to reach property owners directly instead of having to rely on third parties throughout the deal-making process.Data aggregation platforms like Reonomy offer easy access to market information, which provides an unobstructed view of a market, thereby allowing for more insightful decision-making. @reonomy Click To Tweet
When leveraged correctly, commercial real estate technology can optimize the investment process from prospecting to close. As more investors in Chicago and Las Vegas rush to deploy capital into Opportunity Zone properties, finding the correct tech tools and having access to nuanced, granular information will become vitally important to meet demand and differentiate from the competition.
Patrick Rafferty is VP of Product at Reonomy, a commercial real estate data and analytics platform.
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