4 Things Today’s Savvy Real Estate Investors Should Know About Opportunity Zones

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Opportunity zones have been a hot topic in commercial real estate recently. You may be asking “what exactly are opportunity zones?” If you are a savvy real estate investor, here are four things you should know about opportunity zones, beginning with the textbook definition for what they are.

What are Opportunity Zones?

An opportunity zone is an economically-distressed community where investors can earn preferential tax treatment for pouring capital into in. Post-recession, some communities simply did not recover, and these particular communities have become opportunity zones. These zones are approved by the federal government and remain opportunity zones 10 years after they have been designated as so. During this time, investors have the option to defer taxes on their capital gains as long as they invest those gains into an opportunity zone fund. These funds put at least 90% of the pooled capital toward developing these opportunity zones.

This has intrigued interest from commercial real estate clients because of the increased investment opportunities and the guarantee that if the investment is in place for 10 years, the appreciation on the opportunity zone investment is excluded from future taxation.

When Should You Invest in an Opportunity Zone?

Investors are attracted to new opportunity zone investments because of the tax deferment and exclusion factor. Although, the tax reduction benefits are dependent on how long the investment is kept. If the opportunity zone fund is maintained for 5 years, there is a 10% exclusion for this deferred gain and in 7 years 10% turns to 15%.

An investor will become eligible for an increase in the basis of the fund’s investment equal to its fair market value if the investment is maintained for 10 years or more on the day that the fund investment is either exchanged or sold. This is why it is important for investors to understand that the sooner they choose to invest in opportunity zones, the faster this investment begins generating ROI.

Where Should You Invest?

According to  Fundrise, the top 10 opportunity zones to invest in right now are:

  • Oakland, California: West Oakland, Uptown, Jingletown, Coliseum Industrial
  • LA: Downtown and South Los Angeles
  • San Jose: Market Almaden, Washington Guadalupe, East Northside, Jackson Taylor, Mayfair
  • San Diego: Golden Hill, South Park, Barrio Logan
  • Seattle: Beacon Hill, International District
  • Portland: Pearl District, Central Eastside
  • Phoenix: Downtown, Tempe, Chandler, Mesa
  • Nashville: East Bank, Five Points, 12 South, Edgehill
  • Atlanta: Bankhead, Grove Park, English Avenue
  • New York City, Brooklyn

Every opportunity zone will have different needs, so the best option is to find an area that has needs in a sector you are familiar with.

How Should You Invest in Opportunity Zones?

When investing in an opportunity zone, you should consider expanding upon your traditional ideas and putting your capital gains to work. You may not initially think that diversifying your portfolio with assets may yield a lower potential return is a wise choice, but opportunity zones will mix things up. The tax benefits you receive will let you as an investor take a lower pre-tax return on this diverse asset and you will end up achieving a higher post-tax return. This can help promote new projects in these areas that need the work, attention, and expansion.

5 Ways Grocery Stores are Innovating for 2019 and Beyond

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As the adoption of online food shopping continues to grow, what lies ahead for grocery shopping? Food retail is in need of some change, but how exactly are grocery store chains adapting to this new wave of retail trends? Let’s take a look at five ways grocery stores are innovating for 2019 and beyond.

Grocery Stores Will Offer an Experience

In 2016 and 2017, consumers in America spent more money on food at bars and restaurants than they did at grocery stores. Supermarkets will need to think creatively to combat this. Some stores in smaller cities have transformed their space to combine groceries with entertainment. Kroger has plans to open a store in 2019 in downtown Cincinnati that will include a second-floor bar operated by third parties and ready-to-eat items by vendors.

Grocers Leasing Vacant Mall Space

Recently, Whole Foods opened a store in a former Sears location mall in Florida. As mall operators look to supermarkets to fill their anchor department spaces, ancillary merchants like spice shops, wine stores, and cooking suppliers will take adjacent vacant spaces as they open, to form little food hubs. Since the malls need the foot traffic and the grocers need the large blocks of space, the marriage of the two concepts is a truly innovative solution.

Auto Replacement

Many grocery store companies are feeling pressured by the convenience of fast replenishment services offered by Wal-Mart’s Easy Reorder or Amazon Dash. Because of this, grocers will include auto-replenishment on their online marketplaces. Currently, 47 percent of consumers in the United States said they would take advantage of auto-replenishment for household items like toilet paper and soap according to Accenture Strategy. These same consumers also said they would use auto-replenishment for fresh food items like vegetables.

Kiosk

Traditional supermarket operators will need to compete with Amazon as they continue to enter the grocery format. This is where freestanding grocery kiosks will come into the sphere. They will be installed in office buildings, train stations, and other convenient spots for commuters. This will allow for quick orders that can be picked up on their way home or can be delivered. While more expensive than mobile apps, these kiosks can serve as a way to advertise and alert even the busiest commuter of their immediate needs. A kiosk could also promote various items.

Collaboration

New technology will help grocery stores go on camera and sell products live. By collaborating with major household and food brands, grocers can create sponsored online programming that features cooking, cleaning tips and live entertainment along with cooking segments. Viewers will have the chance to click and order any of the products featured. For example, a guest chef could make a recipe using ingredients that the shopper can then order live and make that evening.

Grocery stores will need to adapt to all of the changes that are happening in the retail sector. These are just a few of the ways grocery stores will innovate for 2019 and beyond.