Opportunity Zones are booming in the Big Apple. In an effort to revitalize low-income and under-developed communities across the country, this new government program incentivizes investments in selected areas for notable tax breaks on capital gains. Of the 8,700 different designated census tracts throughout the nation, 514 are peppered throughout New York State. Not surprisingly, it’s New York City where opportunity is most abundant.
Appointed areas vary from borough to borough; Brooklyn has over a quarter (125) of the state’s entire Opportunity Zone pool, while Staten Island has only eight designated census tracts. Considering New York City’s reputation as a commercial real estate magnate, it’s no wonder investors and developers are paying close attention to the market’s potential. To better understand the state of New York City’s Opportunity Zones, we use Reonomy data to explore the five boroughs and their correlated asset pools below.
The northernmost of the five boroughs, The Bronx has a diverse spread of different assets across the municipality. While some asset classes like multi-family and mixed-use continue to prosper, the borough is currently undergoing a slight industrial renaissance. Due to its dense labor pool and level of accessibility to New York’s other areas, more companies are moving their manufacturing headquarters and warehouses to The Bronx. The South Bronx, especially, has seen movement, with large companies like FreshDirect and Jet.com unveiling new manufacturing facilities in the neighborhood.
Considering the area’s industrial revival, now may be the right time to consider its Opportunity Zones for manufacturing properties. Currently, the borough is home to 74 individual Opportunity Zones with over 16,200 different properties and land parcels throughout. Over 1,000 of these individual assets are categorized as manufacturing properties and include an assortment of storage tanks, warehouses and general industrial facilities. Last year’s sales data indicated industrial properties sold for an average $3.16 million dollars–a relatively low number compared to sales prices of other asset classes, like public and office spaces, giving real estate professionals all the more reason to invest.
Ever since Amazon announced their plans to move their new headquarters to Long Island City, Queens has been attracting copious amounts of attention. As the largest borough, Queens is experiencing tremendous growth, specifically in Long Island City and its adjacent neighborhoods. In fact, a study by Localize.city confirmed the waterfront neighborhood is the most popular New York City spot for development.
With more businesses and people slated to move to the area, developers may want to circumvent stiff competition in Long Island City and focus on other prominent, but less aggressive areas. Astoria, for example, is a trendy and fast-growing neighborhood home with a healthy mix of available asset classes for consideration. Sunnyside is also up-and-coming; the recent announcement of the Sunnyside Yard, a planned billion-dollar re-design of the current rail yard, has attention piqued. Developing Long Island City’s surrounding Opportunity Zones can potentially alleviate community saturation while simultaneously giving developers considerable return-on-investment.
Based on Reonomy’s parcel breakdown of Queens’ Opportunity Zones, 6.8 percent of the total property these areas is vacant land. But that shouldn’t deter developers—Queens has over 27,000 individual commercial properties and plots throughout the borough that may be ready for re-development.
Manhattan is a mixed-bag of commercial development with planned projects in a handful of different neighborhoods near Opportunity Zones. Hudson Yards, the 28-acre mixed-use megaproject, has the real estate community honing in on Manhattan’s West Side. It’s predicted development will have a significant impact on the local economy, contributing nearly $500 million annually in City taxes and promising more than 50,000 jobs to the new West Side community.
The Lower East Side is booming, too. The current creation of Essex Crossing, another massive mixed-use space, will bring over 1,000 individual housing units and 1,000 full-time jobs to the area. General development throughout Harlem is surging as well, particularly in multi-family development spanning from Sugar Hill through East Harlem.
Considering the growth occurring in each of these neighborhoods, investors may want to take advantage of the island’s 35 different Opportunity Zones. Currently, there are more than 7,000 individual assets and land plots in these designated census tracts. Reonomy data shows multi-family makes up almost three quarters (74.6 percent) of total parcel stock, with special purpose property and vacant land at second and third, respectively.
Brooklyn is a hotbed for the multi-family market. By the end of the first half of 2018, Brooklyn had already outpaced Manhattan’s multi-family market, and proceeded to eventually cross the $1 billion dollar threshold at the end of September. While activity is occurring across the borough, certain neighborhoods are catching the eyes of real estate professionals, especially with the introduction of Opportunity Zones. Sunset Park, for example, is gaining traction for its proximity to mixed-use spaces like Industry City and the Brooklyn Army Terminal. Bushwick and Bed-Stuy are also on the rise. These neighborhoods have already experienced a transformation that will likely continue its trajectory as more industry professionals take advantage of new incentives.
Reonomy data supports multi-family’s success throughout Brooklyn. In 2018, the asset class comprised 47.3 percent of the year’s entire sales. For those interested in investing in this market, opportunity is aplenty. Brooklyn’s Opportunity Zone asset pool is 70.4 percent multi-family housing, ranging from small, cozy apartment buildings to sprawling condo complexes. Sales prices are low compared to other asset classes, as well—data on 2018’s multi-family sales shows an average price $1.9 million and a median price of $839,000.
Don’t let its size fool you—Staten Island is experiencing growth and economic transformation. The North Shore, particularly, is expanding as the commercial real estate community turns its attention to the bustling transit hub. The area has a handful of retail spaces coming down the pike, including the Empire Outlets, a 100-storefront outlet mall spearheaded by BFC partners, and Lighthouse Point, a 200-million mixed-use project led by Triangle Equities.
While the island only has 8 designated census tracts, there are still over 3,000 assets for exploring and analyzing. Over 1,600 of these assets are located on or near the North Shore, in St. George and Stapleton. The majority (60.8 percent) of associated assets are multi-family properties. As the North Shore continues to grow with retail and mixed-use spaces, it’s likely to attract more residents, potentially making multi-family property within the Opportunity Zones a lucrative investment.