Investors and developers arepaying a premium for land sites in opportunity zones. A new studyfrom Real Capital Analytics shows a rapid increase in pricing foropportunity zone deals. According to the study, prices forredevelopment projects in opportunity zones increase 14.2% sinceDecember 31, 2017, while prices for vacant land for ground-upconstruction has increased 20.9%.

“These higher land prices suggest that the tax benefits are nowbeing priced into land sales and investors do not appear to ascribeany future Net Operating Income (NOI) growth to Opportunity Zonesresulting from that designation,” Phil Jelsma,partner and chair of the tax practice teamat Crosbie Gliner Schiffman Southard &Swanson, tells GlobeSt.com. “If NOI were expected to growin Opportunity Zones, the program would demonstrate the potentialto increase productivity within the target areas. Ratherthe program seems to be resulting in higher sales prices toexisting landowners for transactions that would have occurred inthe absence of the Opportunity Zone program.”

While the prices have increase rapidly since the announcement ofthe opportunity zone tax benefit, Jelsma expects pricing tocontinue to increase for assets in opportunity zone areas. “I don'tbelieve these price increases are temporary,” he says. “I thinkyou'll find the same or similar price increases in multifamily.Developers are moving on available properties that fit theopportunity zone property profile, either older property that isripe for redevelopment or vacant land.”