Opportunity zones were created to spur development in distressed neighborhoods. But developers in some areas are having a tough time finding tenants for their properties. It turns out that another rising trend in commercial real estate, coworking spaces, creates a viable combination.
- How can the combination of opportunity zones and co-working spaces be an effective way to drive innovation in communities?
- Large, established companies like IBM and UBS are starting to fill some of the co-working spaces. How can their presence be a way to test new ideas and recruit innovative talent?
- Do you know where your opportunity zones are within your city? If not, what can you do to learn more and participate in them?
- The Opportunity Zone program, enacted as part of the federal tax overhaul in December 2017, was created to stimulate private investment in economically distressed communities in exchange for a break on the capital gains tax. There are now more than 8,700 such zones nationwide.
- Opportunity zones are places in the U.S. where over 30 million people live and work across the country. They cover downtown, industrial, suburban, and rural areas. They’re part of daily life for a lot of people.
- According to Morgan Simon, who writes about money and social justice for Forbes, ”Simply understanding the mechanisms of OZs [opportunity zones] creates a major barrier to entry for more socially-minded investors.”
Startups are attracted to the lower costs of shared office space and access to networks of investors looking for companies to back. This combination is now creating new incubators in underserved markets.
The former General Electric campus in Fort Wayne, Indiana, a long-planned development called Electric Works, sits in an opportunity zone. The project includes 2.7 million square feet, and co-working is expected to take up more than 72,000 square feet of that space.
Electric Works’ co-working component — available month to month to companies with up to 15 employees — is a key part of an effort to draw the surrounding community into what its investors say will be an innovation hub in the city.
Construction on Electric Works is scheduled to start in the first quarter of 2020 and isexpected to take at least 18 months. The co-working component is part of a larger trend that is bringing more entrepreneurs to opportunity zones.
Co-working, in general, continues to gobble up a sizable portion of the office market in the United States. Co-working operators accounted for more than 10.1 million square feet of office leasing activity nationally during the first six months of 2019, behind only the technology sector and ahead of industries such as finance, health care, and law, according to Jones Lang LaSalle, a real estate services firm.
Opportunity zones are simply an incentive to move capital across America in a more inclusive fashion; more quickly and to more places where it just naturally wouldn’t occur. Some investors are just taking advantage of a tax tool, and most are not claiming to have any social impact. Ideally, social entrepreneurs from the impact investing world will begin working on opportunity zone investments.