The Economic Innovation Group (EIG) released the results of a national survey on the state of the Opportunity Zones (OZ) marketplace. The survey polled a range of leading stakeholders to assess the impact of COVID-19 on Opportunity Zone transactions and investor behavior. EIG's survey click here.
While 52 percent of respondents report that current market conditions are having a negative impact on activities, 58 percent are optimistic about the future of the Opportunity Zones marketplace. Disruption and uncertainty sowed by the pandemic arrived just as increased regulatory clarity, higher levels of investment, and emerging market norms combined in early 2020 to create strong headwinds and encourage broader participation from a diverse group of stakeholders. However, responses are evidence of the underlying resiliency of a market made for long-term investing. Seventy-one percent of respondents affirm that investors remain interested, and nearly half say investors are actively looking for opportunities to place capital. Two-thirds of respondents attribute current hesitancy to investor's inclination toward waiting for the market to regain some degree of certainty and stability before proceeding.
"The current economic crisis has caused significant short-term disruption, but insights gained from the survey offer a reason to be optimistic about the longer-term resiliency of the Opportunity Zones marketplace," said EIG Director of Impact Strategy Rachel Reilly. "Despite the economic uncertainty across the country, a clear majority of investors, fund managers, and project sponsors remain committed to the positive impact they hope to achieve. Some stakeholders are choosing to double down on their OZ activities to support long-term economic recovery, and federal policymakers should take action to equip them with the tools needed to do so."
In the face of widespread disruption due to COVID-19, the survey findings show overwhelming support for action from federal policymakers to bolster the Opportunity Zones marketplace. Specifically, sixty-four percent of respondents agree that extending the 2026 deferral deadline would make Opportunity Zones a more effective tool of economic recovery from the current crisis.
EIG Director of Research Kenan Fikri added, "The Opportunity Zones marketplace was just gaining steam as the pandemic hit. Regulatory clarity and emerging market norms were unlocking investment for all different types of communities across a truly diverse range of activities. Despite the challenges and setbacks caused by COVID-19, the responses gathered in the national survey reaffirm the underlying resiliency in a market made for long-term investing." Some of the key findings include:
- Recent economic conditions have had a chilling effect on the Opportunity Zones (OZ) marketplace, as 52 percent of respondents reported that the crisis had a negative impact on their OZ activities.
- While investors may be waiting for signals of market stability prior to finalizing investment decisions, most respondents report that investors remain engaged in the OZ marketplace and that some are still actively looking for new opportunities to place capital.
- The crisis has affected the work of OZ stakeholders in varying ways and will likely cause some to reduce their level of engagement and others to double down over the long-term.
- Most respondents remain optimistic about the future of the OZ marketplace, and 49 percent of fund managers believe their OZ strategy is well-suited to the current environment.
- However, the prospects for sustaining and capitalizing on this enthusiasm may hinge on actions taken by the government in the near-term, most notably, whether Congress extends the OZ investment deadline beyond 2026.
To read more about EIG's survey click here.