My first thought was too much shade, but Palisades is supposed to be one of the shade tolerant/loving zoysias.

I wonder about competition for moisture from the tree roots right there?

Thanks dchall. Yes, the roots of the tree could very well be taking up most of the moisture. I will increase the watering time to account for that.

Given that the new grass is only about 8 weeks old, will the zoysia be able to recover with increased watering, during this summer?

I think it takes a while for zoysia to get fully established. I noticed that they wilt rather quickly if gone too long without water early on. 8 weeks isn't long enough for sure.

Maybe the sprinklers are off or something. Put tuna cans everywhere and see how much water they get during your normal watering time and adjust it accordingly. Once established, they are hard to get rid off compared to bermuda and st augustine in partial shade condition like yours esp during terrible drought.

After watering zoysia yesterday, I found it this morning with grey spots. 2 weeks before I had the same thing (yellow part) and I thought that I had applied too much fertilizer. Finally the problem is poor drainage maybe...

I had the exact same experience. Do you see any small white moths flying around when you walk through the grass? Their larvae love newly planted sod and kill it from the roots.