Cherry-Picking Industrial Properties in Opportunity Zones
Real Estate Economics, Volume 50, Issue 5, September 2022, Pages 1201-1230
45 Pages Posted: 8 Feb 2023
Date Written: April 9, 2021
Abstract
We examine the impact on industrial property prices following the launch of US Opportunity Zones – a location-based tax incentive program intended to attract investment into low-income communities. Using a national sample of commercial real estate transactions, we document significantly higher transaction premiums, when matched with comparable transactions in eligible tracts that were not included in the program. Consistent with development options that are incentivized by the program, we find that premiums are concentrated at properties with the largest amounts of excess land available, and we observe no evidence of spillover effects to properties that do not possess similar optionality. Among the designated Opportunity Zones, significant transaction premiums appear in areas that previously demonstrate high employment and population growth. Overall, we do not find evidence to suggest that the aggregate share of commercial real estate transaction volume to Opportunity Zones has increased following the legislation.
Keywords: tax incentives, location-based policy, clientele effects, commercial real estate, opportunity zones
JEL Classification: H25, I38, R38
Suggested Citation: Suggested Citation