IRS Extends Tax Deadlines

The IRS issued guidance Thursday evening to grant deadline relief for both 1031 like-kind exchanges and opportunity zone investments that are already underway.  Both of these programs are designed to promote economic growth in communities, and NAR made the case that investors in these programs should not be harmed due to the effects of COVID-19.
     

·        1031 Like-kind exchanges.  If an investor has taken the first step of a like-kind exchange by selling the old property, and either the 45-day or the 180-day deadline falls between April 1 and July 15, the deadline has been extended to July 15. 

·        Opportunity Zones.  If an investor who sold a capital asset planned to roll over the gain into an Opportunity Fund and the 180-day deadline to do so falls between April 1 and July 15, 2020, he or she can make the investment as late as July 15.  

Also, sole proprietors who pay quarterly estimated taxes now have until July 15 to file their second quarter payment.  As a result of an earlier IRS notice, first quarter estimated tax payments had already been extended to July 15.  This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.  

NAR has advocated heavily for these extensions since the outbreak of the COVID-19 pandemic. We'll have a full analysis of this announcement Friday on our dedicated coronavirus page.

Market Trends Around the Country

According to the National Association of Realtors, tides are turning in the commercial real estate market.  Money is "starting to flow into commercial real estate".  Loan originations more than doubled from the first half of 2010 to the first half of 2011 (although they are still well below peak levels).  REIT values were at an all-time high.

Office vacancies have drastically declined, more due to the lack of new product than the increase in rentals, but owners of Class A space are giving fewer concessions than a year ago.  Tenants are still kings in the Class B and C markets.  Retail space, which tends to fall with housing, had been very depressed, and is definitely on the way back  now.  Industrial space sales were up more than 50 percent, with the majority being warehouses. Hotels were the lagging performers, with average pricing on sales decreasing and average room rates increasing only slightly.

Multifamily property sales more than doubled from 2010 to 2011, and apartments are the highest performing category of commercial real estate.  Effective rent per unit has bounced back to its peak, paving the way for building more capacity.  Also, rents are on the rise, with vacancies and concessions declining.  When this is combined in New Haven with the country's lowest vacancy rate, we can see this strong market continuing.

All in all, while improvement will be slow and steady, the future certainly appears brighter than the recent past, and should build upon itself as others are drawn to agree.