Cherry-picking industrial properties in opportunity zones

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.

Automated summary

This study examines the impact of the launch of US opportunity zones on industrial property prices. The results show that there is a significant increase in transaction premiums in eligible tracts compared to similar tracts that were not included in the program. These premiums are mainly concentrated in properties with excess land available, suggesting that the program incentivizes development options. The study also finds that areas with high employment and population growth show significant transaction premiums. Overall, there is no evidence to suggest that the share of commercial real estate transactions to opportunity zones has increased following the legislation.