A primary criticism of the qualified opportunity zone program is the lack of reporting on their impact, the requirement for which was stripped out of the legislation that gave birth to opportunity zones in 2017. As the program faces the final three years of its planned lifespan, barring action by Congress, sponsors of opportunity zone funds are begging to proactively provide economic analysis regarding the impact of their programs.
Griffin Capital Company LLC, a private real estate investment manager and sponsor of qualified opportunity zone funds, this week published a self-prepared economic impact analysis report that provides insights on the estimated contributions to local economies resulting the development and operations of the multifamily communities within their qualified opportunity funds.
“With over $1.7 billion in equity raised across four qualified opportunity zone funds, comprising 28 multifamily properties with a total project cost of $3.2 billion, Griffin Capital remains committed to achieving both terrific outcomes for investors and meaningful, positive contributions to the communities in which we invest,” stated Nick Rosenthal, co-chief executive officer of Griffin Capital Company.
Griffin says it relied upon IMPLAN’s regional economic impact analysis software to prepare its analysis. IMPLAN’s software uses the input-output, or I-O, economic modeling technique pioneered by Nobel Prize winner Wassily Leontief. Capturing the effects of economic activities, Griffin Capital said the model demonstrates how development and operations across industries, households, and governments contribute to broader economic growth and job creation.
“Five years removed from the launch of our first opportunity zone fund, we wanted to better understand and report to our stakeholders on the impact this program has had and will continue to have on the communities in which we are investing. The capital formation that has occurred as a result of the creation of this program is helping to address critical issues like housing affordability at a time when new housing starts have declined dramatically; additional jobs at a time when there is softening in the labor market; and will be additive to long-term economic stimulus in these communities. This is a perfect example of how providing appropriate incentives to the private sector can help solve important policy issues. It is the quintessential win-win,” Rosenthal continued.
The projections are based on estimated development costs and operational data as of June 30, 2024, and cover the expected hold period of each property. For the purpose of the analysis, the “local economy” refers to the county in which each property is located.
Key findings:
- Nearly $7.1 billion in total estimated economic impact;
- Approximately 3,230 estimated average annual jobs supported across the development and operational phases;
- More than $5.1 billion in direct economic impact from the development and operations of the multifamily properties;
- More than $728 million in indirect effects, reflecting business-to-business transactions across the supply chain; and
- Just over $1.2 billion in induced effects, representing additional economic activity generated as employees and businesses spend their income within the local economy.
The Griffin report follows on the heels of a 2023 economic impact study by FTI Consulting on behalf of real estate investment sponsor Capital Square, which found that five multifamily communities developed by Capital Square in a Richmond, Va. opportunity zone that delivered a total of approximately 900 apartment units generated significant economic and fiscal impacts, including the creation of approximately 1,500 construction jobs and 63 permanent full-time jobs. In turn, the developments were found to have generated $9.7 million in annual state and local tax revenue during their construction phases and were projected to deliver $7.7 million in annual state and local tax revenues during their operational phases. A separate report prepared by FTI on behalf of Capital Square analyzed the economic impact of a 50-unit mixed-use development in Charleston, S.C., funded by one of the company’s opportunity zone funds and similarly found a significant local economic impact.
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