Friday, February 1, 2019

Opportunity Zone Parcels To Watch In Philadelphia in 2019

Looking to capitalize on the emerging tax benefits by investing in Philadelphia-area Opportunity Zones in 2019?

As it stands, the U.S. Department of Treasury's new Opportunity Zone program is far from a silver bullet for quickly transforming most of Philadelphia's economically distressed neighborhoods.

The federal government is still hammering out its final guidelines for investing in qualified opportunity funds. While still unofficial, a host of proposed regulations signal that investors will likely be required to undertake steep upfront development costs in Opportunity Zone properties -- either through new construction, use conversion, or major capital improvements -- while reductions in their taxable basis in these projects only begin to accrue in year five of the investment.

This means that only Philadelphia's best-positioned opportunity zone sites -- whose eventual rents and sale prices stand the greatest chance of justifying significant upfront construction costs -- are likely to attract serious interest from opportunity zone funds in the year ahead.

Using CoStar's database of more than 300 commercial properties currently listed for sale within Philadelphia's Opportunity Zones, we have identified which development sites within these listings have the highest median household incomes within a one- to three-mile radius.

These three sites may be worth watching as investors are expected to increasingly turn their attention to opportunity zone investments in 2019:

900 Spring Garden Street
Of all the opportunity parcels in Philadelphia listed for sale on CoStar, 900 Spring Garden -- in the emerging Spring Arts District -- ranks highest for median household income within a one mile radius, at just over $70,000. In true Spring Arts District fashion, there are already three different breweries up and running within three blocks of this site.

1314-1332 Spring Garden Street

Median household income of $67,000 within a one mile radius of 1314-1332 Spring Garden rank the property second under this metric among Philadelphia's opportunity zone parcels available for sale. The site is less than one block from the Spring Garden stop on the Broad Street Line and is a 10-minute walk from the Center City teaching hospital of Drexel University's College of Medicine.

3114 Gray's Ferry Avenue

Thanks to its proximity to Philadelphia's healthcare employment engine in University City, and to the pricey Southwest Center City neighborhood, this site -- which consists of a mix of industrial properties, housing and land -- has the highest median household income within a three-mile radius of any development site listed for sale on CoStar and located within a Philadelphia Opportunity Zone. As a bonus, its location also provides quick access to I-76 for residents looking to get a head start on Philadelphia's notorious reverse commute.

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