Opportunity Zones in San Jose
Due to the relative wealth of the Silicon Valley area, finding Opportunity Zones for tax-preferred investment is challenging. Few communities have significant census tracts that fully qualify for the program.
Except for San Jose
As reported in BizNow, San Jose’s Opportunity Zones have the advantage of significant geographic diversity, and are comprised of various different types of assets, from residential to mixed use and industrial. This should attract interest from a variety of investors.
The downtown San Jose area has numerous Opportunity Zones designated. With the planned Google Transit Village, an estimated 25,000 new jobs could be added to the area, through planned development to support the village. There has been a veritable 21st Century “gold rush” to secure property around Diridon Station, which is expected to eventually house high-speed rail capabilities. The face of downtown San Jose could change significantly, especially if the self-imposed height restrictions on office and residential buildings is amended to accommodate Google’s plans.
According to local officials, there is significant developer interest in downtown San Jose, but with constantly rising costs, many projects have trouble raising the needed capital for completion. Opportunity Funds, which are the investment vehicle powering Opportunity Zones, could provide the shot in the arm to stimulate additional growth and development in these economically depressed areas.
While the primary goal of Opportunity Funds are to profit the investors, the 10-year holding period required by the IRS in order to avoid taxes on any capital gains generated by the fund means that Opportunity Funds will need to be very committed to successfully developing and sustaining real estate projects in the Opportunity Zones. This can only benefit San Jose, with the potential for job creation, more sustainable housing, and a plethora of other advantages.
The downtown area is not the only area that stands to benefit from increased investment. Industrial areas, retail areas, and residential areas within the qualified Opportunity Zones could see renewed interest in investment and business activity. Opportunity Funds could participate multiple ways in these investments, from acting as the developer on specific projects, entering into joint ventures, or supplying capital to other developers.
Keystone Commercial Brokerage serves the needs of commercial real estate investors in the Santa Clara and San Mateo counties, specializing in commercial property, multi-unit residential, office space, and multi-use property. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas. Contact Paul at 650-924-2544, or email at [email protected].