Developers, Advisors Lay Groundwork for OZ 2.0 Investments
As the Opportunity Zone 2.0 program nears full gear in January 2027, both commercial real estate developers and financial advisors are making moves to take advantage of it.
That’s happening as potential participants gain clarity about where the newly designated Opportunity Zones might be located—July 1 marked the start of a 90-day period during which state governors can nominate census tracts for eligibility in the program.
In addition, new IRS guidelines provide a 180-day lookback period for capital gains realized in the second half of 2026, allowing investors to benefit from OZs 2.0.
While all of the tract nominations won’t be finalized until the fall, some real estate developers are moving ahead with new funds designed to take advantage of OZ 2.0. The revamped program is viewed as an improvement on the original because it will become a permanent part of the tax code, feature a five-year rolling deferral period and automatic 10% tax reduction after five years and comes with a new, 30% reduction in the deferred tax amount for investments in rural Opportunity Zones, according to Peter Ciganik, partner at GTIS, a New York City-based real estate investment firm.
Plus, investors who are expecting to see 1099 gains realized after July 8 of this year, as well as those with K-1 gains from any point in 2026, will be able to defer those through the new OZ 2.0 program, Ciganik noted. (Because K-1s are normally reported in March of the following year, they will provide a bridge to 2027, when the new OZ program will officially go into effect, he explained).
“We have seen a significant pickup in interest from investors who are starting to look at their 2026 capital gains that can be deployed in the new Opportunity Zone program,” Ciganik wrote in an email. “Some of these are investors familiar with the original program; many are new and considering the program for the first time as enhanced tax benefits come into effect. OZ 2.0 has several features that make it more powerful from a tax optimization perspective than the original program.”
William Connor, a partner at Parsippany, N.J.-based SAX Wealth Advisors, an RIA with approximately $5 billion in AUM that serves high-net-worth and ultra-high-net-worth individuals, shares that view. He said many of his firm’s clients have liquidity events before the end of the year, and the firm is discussing with them the potential to reinvest the proceeds in Opportunity Zones 2.0. That comes after a period in which investors’ interest in OZs waned amid the looming sunset of the program.
“With this new legislation piquing people’s interest, I am not having a lot of inbound calls right now, but I am certainly talking to a lot of clients who have upcoming liquidity events, and the increasing knowledge of what Opportunity Zones 2.0 are, it’s getting people [to discuss] it again as an idea,” Connor said. “There is an increasing amount of interest as we head into the fall and its official launch in 2027.”
In Connor’s view, the program becoming evergreen means clients will be able to make OZs part of a diversified portfolio, rather than positioning them as single-asset investments with a development component that carries heightened risk. Connor said major increases in interest rates since OZs were first introduced in 2017 have negatively affected a number of deals conceived when rates were near zero. The program’s permanence will give both sponsors and investors greater leeway to deal with such challenges, in his view.
Another part of the OZ 2.0 program Connor is excited about is the 30% basis step-up on deferred gains for investments in rural Opportunity Zones. Previously, the maximum step-up was 15% after an investor held the property for seven years.
Some real estate developers are so confident they will see increased demand for the OZ 2.0 that they are launching funds before the final census tract nominations are even submitted. For example, in late April, Peakline Real Estate Funds, a Chicago-based private real estate investment firm, announced the launch of its Peakline Real Estate Qualified Opportunity Zone Fund IV (PREF QOZ OV) program—its fourth.
The program, targeting $1.3 billion in equity commitments, will include a metro fund and a rural fund, allowing investors to reap upgraded tax benefits for investing in rural communities. The rural fund will target lower-density residential, industrial and energy infrastructure assets in designated Rural Opportunity Zones, while the metro fund will focus on multifamily, mixed-use and select infill industrial assets in high-density areas. The fund was opened to investors even before Peakline knew which areas would be designated as new Opportunity Zones and does not expect to start deploying capital until January 2027, when the OZ 2.0 program goes into effect.
Peakline executives did not respond to requests for comment, but Michael Miller, co-founder of Peakline Real Estate Funds, told CoStar News the firm expected new tract designations to align with its existing landholdings and development sites. The firm also anticipates robust investor interest from those who may realize capital gains this year from the SpaceX and Anthropic IPOs.
