Developers and investors praised the Opportunity Zone program when it became law as part of the 2017 Tax Cuts and Jobs Act. The hope was that the program would lead to new office buildings, apartment complexes and industrial facilities in neighborhoods that had largely been bypassed during the commercial real estate boom.
The hope is that the program, which offers investors financial incentives to bring private capital to areas designated as Opportunity Zones, will bring new commercial activity to communities that have long struggled to attract investors and construction.
It is early, but the Opportunity Zone is making an impact. Consider downtown Bloomington. Here, Birge & Held recently held the ground-breaking for Urban Station Phase II, a 66-unit multifamily development with 12,200 square feet of ground-level retail space.
The project, at 321-331 S. Walnut St. in Bloomington, is located near the Bloomington Transit Center, existing apartment buildings and office space. It is also one block from Kirkwood Avenue, a popular dining and nightlife corridor in Bloomington. Indiana University is just 0.5 miles to the east.
The apartments will bring new life to a land parcel that has long been underused. Today, the lot contains two single-story commercial buildings that have long been outdated.
The fact that Urban Station Phase II is in an Opportunity Zone has made it easier to raise the equity needed for the project, said Jarod Brown, managing director and head of acquisitions and development with Birge & Held.
“We’ve been reading about Opportunity Zones every day,” Brown said. “We’ve had meetings with investors about the potential. This project has been a great opportunity to see the Opportunity Zone legislation at work. There is not a lot of development located in those areas designated as Opportunity Zones. It can be difficult to place Opportunity Zone capital. We feel fortunate that this project happened to be in an Opportunity Zone.”
Brown refers to the Urban Station project as a classic redevelopment play. The strip mall that the new apartment building will replace had been long underutilized. The building stood out in a part of downtown Bloomington that had seen a significant amount of redevelopment in recent years.
“This is bringing to life a great parcel of real estate with a new use that is more effective for that particular piece of real estate,” Brown said.
Urban Station Phase II is scheduled to open in July of 2020. It will join a downtown Bloomington area that, like many other urban areas across the Midwest, has seen an influx of new retailers, restaurants and entertainment options. Instead of an outdated strip mall, the project will bring first-floor retail, three floors of apartment buildings and parking to the area.
“It will have more of an urban feel,” Brown said. “There has been a surge of downtown redevelopment and development in Bloomington. This will add to that.”