Much of Birmingham, Alabama Designated an Opportunity Zone

Opportunity Zones have been a hot topic among both community leaders and investors. However, with all of the discussion they are creating, not much is known about them, and the long-term benefits have yet to be determined.

Opportunity Zones were set up less than a year ago. Quietly tucked into the Tax Cuts and Jobs Act of 2017, these areas were established in the hopes of spurring economic development in “economically distressed” communities — low-income areas with a poverty rate of at least 20 percent and a median household income of less than 80 percent of the statewide figure. In essence, the plan allows investors to defer tax income on capital gains revenues if they re-invest that money into an Opportunity Fund, an account that invests in properties in an Opportunity Zone. Additionally, investors are eligible to receive larger tax breaks on the returns the Opportunity Fund generates the longer they hold the investment.

Of the more than 150 Opportunity Zones in Alabama, one of the most prominent is in Birmingham. The area encompasses downtown, and goes up through North Birmingham and Fultondale, and east through Woodlawn and North Eastlake. Over 21 million square feet of office space, 14 million square feet of retail space and 14,000 apartment units fall within these boundaries.

Perhaps influenced by the Opportunity Zone program, investment activity has been strong in 2018. The major in-town submarkets that comprise most of Birmingham’s Opportunity Zone have seen investment in office, retail and multifamily hit a level nearly 70 percent above the area’s historical average.

Additionally, there are several large developments in the works. One such project is The Denham , which is repurposing a long-vacant industrial building into a mixed-use project with office, retail and apartment space. There are also some proposed projects in the pipeline. One that has begun site work is Lakeview Green . This project is another mixed-use development that will bring both condos and apartment rentals, in addition to nearly 40,000 square feet of ground floor retail space, to the area.

The Opportunity Zone program is seen as a way to not only increase development in economically distressed communities, but to also incentivize developers and investors to undertake projects that have viable prospects for long-term success.

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