DFW’s opportunity zones – complexity and timing are key challenges (part 2)
While investment opportunities exist, deal complexity & a 10-year horizon limit meaningful community change
September 02, 2020
JLL Opportunity Zone Analysis Tool
Dominant SF inventory sector
Recent total investment activity in DFW opportunity zones
- As we noted in our first installment, while Opportunity Zones were created to spur community re-investment, a variety of financial and operational challenges prevent them from maximizing their impact and achieving their intended goals.
- While substantial Fund money has been raised, DFW deals have been scarce. Based on information that we collected, there has been notable investment in OZs, but no source exists to track if these are “private investment” or true Opportunity Fund deals.
- Our DFW information shows that since the start of 2019, 9.7 million square feet has changed hands in OZs. Industrial and multifamily assets have been the most significant, although the average deal size is small at 24,700 square feet.
- In addition, 2.8 million square feet is now for sale in DFW OZs (16,800 square feet average deal), with 2.9 million square feet under construction (160,700 square feet average project size).
- Within DFW, many solid areas exist to invest, but these economically disadvantaged areas require extra time to make projects come to fruition. Complex urban projects can easily require 12-24 months and as much as 4+ years to tee-up the necessary partners and mechanisms.
- DFW’s economic development sophistication and strong economy bring a significant advantage compared to many markets in its ability to layer various financing mechanisms to close funding gaps. This also creates a challenge because these tools make deals more complex, requiring more time for a program with a finite end date.
- It is also worth remembering that other federal programs encouraging economic development (such as low income housing tax credits, new markets tax credits, EB5 financing, etc.) often took 5 years or more for investors to become sufficiently familiar, and comfortable, with the programs to begin making meaningful investments. OZs, with their 10-year investment horizon, have only been around since the end of 2018.