Opportunity Zones are soaring in the City of Angels. As part of the 2017 Tax Cuts and Jobs Act, the new government program is designed to stimulate struggling economies across the nation. Investors and developers can reinvest in property in over 8,700 designated census tracts throughout the country for substantial tax breaks on capital gains.
The greater Los Angeles area alone has over 270 designated zones that qualify for these incentives, spanning from locations in San Fernando, all way throughout Santa Ana. As the second most populated city in the United States and largest city in California, Los Angeles’ Opportunity Zones are full of potential. Below, we explore the city’s’ areas of opportunity, specifically in Los Angeles, Orange, and Ventura counties. Using Reonomy data, we’ve uncovered available parcels in these Opportunity Zones that are likely to deliver strong return-on-investment.
Los Angeles County:
The most populated county in America, Los Angeles County, is packed with people and is growing by the day. It is predicted the LA county’s population of 10.6 million will increase by another million by 2035. This significant population growth is causing a housing crisis across the region. Today, nearly half of all developable land throughout Los Angeles is zoned exclusively for single-family homes, and according to the Department of City Planning, a little under two-thirds of the city’s land is now zoned for residential development. But of the land zoned for residential development, over 75 percent is only reserved for single-family homes or duplexes.
The city’s shortage of affordable housing is problematic: homelessness rates have surged a staggering 75 percent in the past six years, while over 30 percent of renters are critically cost-burdened, delegating over half of their monthly income to rent each month. But with nearly half (48 percent) of all assets in Los Angeles County’s Opportunity Zone’s categorized as multifamily, investors and developers have a chance to mitigate the area’s affordable housing issues while simultaneously securing tax benefits.
Reonomy data shows over 36,500 different multifamily units in Los Angeles County. So, what neighborhoods, specifically, should real estate professionals pay attention to? While downtown L.A. continues to boom, trends show surrounding submarkets, like Koreatown and Inglewood, are on the rise and have Opportunity Zones ripe for multifamily investment. Koreatown is on the come up, with 52 different construction and development projects currently underway or in the pipeline. Inglewood is experiencing momentum as well, with a number of large developments coming down the pike, including a new multi-billion dollar football stadium slated to attract a number of additional projects. Investors and developers should consider investing in exploring the 2,000+ multifamily properties in Opportunity Zones between the two suburbs for helping growing communities and ensuring maximized return-on-investment.
West of Los Angeles County, Orange County is significantly smaller than its colossal neighbor with a population of roughly 3.1 million residents. Though most known for its affluent communities of Irvine, Laguna Beach, and Newport Beach, Orange County is home to 26 designated census tracks in need of economic development. While multifamily and other commercial verticals throughout the county garner attention from investors, manufacturing slips by as a dark horse. EconoVue research indicates manufacturing as the largest supplier of jobs in Orange County, with 258,196 industrial workers.
Considering the dominance of e-commerce and the need for big warehouses, industrial real estate will continue to grow, making it attractive for those to invest in Opportunity Zones throughout Orange County. Reonomy data shows industrial properties make up 26.5 percent of the county’s total Opportunity Zone parcel supply, with over 2,000 different warehouses, factories and manufacturing sites scattered throughout Orange County. Competition for these assets isn’t too stiff, either; 2018 data shows only 15.7 percent of the year’s sales were in industrial assets sold at an average price of $6.4 million. Those interested in Orange County’s Opportunity Zone’s certainly shouldn’t ignore its industrial industry.
Ventura County is the smallest of the three regions, with a population of just over 854,000 residents. While Ventura County only has eight designated census tracts, these areas are brimming with potential with 3,385 different parcels and properties for potential investment. What industries should the real estate community be watching? Mixed-use and retail, especially in the city of Oxnard, are on the rise. Notable projects include the proposed Pleasant Valley Plaza, a 193,000 square foot (sf) remodel with mixed-use retail space, and Rio Urbana, 15,000 sf of office space shared with new condominium units.
Looking to capitalize on the area’s retail success? Nearly 15 percent of the parcels in Ventura County’s Opportunity Zones are categorized as retail or mixed-use spaces. In Oxnard’s Opportunity Zones, specifically, there are over 200 different retail and mixed-use properties located throughout the city. Additionally, 12.6 percent of the parcels in Ventura County’s Opportunity Zones are vacant land plots ready for development. These assets may be a lucrative investment to stimulate the surrounding economy while ensuring business growth.