New Opportunity Zones 2025: The 10-Year Tax Break CRE Investors Can’t Afford to Miss
Marc Perlof • August 26, 2025
Hey, Retail Real Estate Rockstars!
Opportunity Zones 2025 (also known as "OZ 2.0") are now a permanent power tool in your portfolio plan if you own or invest in commercial real estate. On July 1, 2026, new zones will be certified, and on January 1, 2027, they will go into effect, each lasting a full decade.
Why this matters: With significant tax advantages, retail establishments, dilapidated shopping malls, and even disused strip centers can be converted into apartments, mixed-use buildings, or in-demand community assets. This is your cue if you've been sitting on a fantastic location in an area that is undergoing change.
What’s in Store for CRE Owners and Developers?
- Permanent OZ Program – No more sunset dates. Governors redesignate zones every 10 years, with the first refresh kicking in January 1, 2027 ¹.
- Stricter Eligibility, More Impact – Only census tracts with ≤70% median family income or ≥20% poverty rates qualify. Contiguous tract designations are gone, focusing capital where it’s needed most ².
- Rural Advantage – Rural-designated OZ tracts now get a 30% basis step-up (vs. 10% elsewhere) and have the “substantial improvement” threshold reduced from 100% to 50% of the acquisition price. All other OZ tracts still require the full 100% improvement ³.
- Simplified, Rolling Benefits – Post-2026 investments qualify for a five-year deferral, 10% basis step-up (30% rural), and zero tax on gains after a 10-year hold ⁴.
- New Zones – The first redesignation happens July 1, 2026; zones go live January 1, 2027. Governors will repeat the process every decade ¹.
Clarifying the Timing Rules
- OZ 2.0 benefits apply to capital gains invested in a Qualified Opportunity Fund (QOF) after Dec 31, 2026.
- To qualify for the new zones, your QOF investment must occur on or after January 1, 2027.
- Property acquisition timing matters: eligible OZ property must generally be acquired after the zone’s applicable start date (so, for new 2027 zones, purchases must be after Jan 1, 2027).
- You must invest eligible capital gains into a QOF within 180 days of realization.
Why This is Big for Retail-to-Mixed-Use Conversions
- Higher & Better Use: Replace obsolete retail with apartments, co-working, or service tenants.
- Financing Appeal: OZ tax incentives improve your capital stack.
- Demand Drivers: Many OZ tracts are in urban infill locations with housing shortages and strong rent growth.
Key Insights at a Glance
- Governors select new OZs every decade, starting July 2026 ¹.
- Rural projects enjoy triple the basis step-up of standard OZs and a 50% improvement requirement ³.
- Eligibility tightened to 70% AMI—raising redevelopment stakes ¹.
- The 2026 sunset is gone, giving long-term certainty ⁵.
A Few Powerful Data Points
- $100B invested since 2017 through OZs, driving housing + retail redevelopment ⁶.
- Between 2019 and 2024, OZs supported 313,000 new housing units ⁶.
What This Means for CRE Investors
- If you own retail, mixed-use, or development-ready land in an OZ:
- Plan multi-phase redevelopments without worrying about program expiration.
- Consider mixed-income housing above retail for added revenue.
- Tap into rural OZ super-incentives if you hold outside core metros.
- Align OZ with 1031 exchanges, LIHTC, municipal incentives for maximum ROI ⁷.
Commercial real estate is entering a golden decade for tax-incentivized redevelopment. Whether you’re eyeing a retail-to-apartment conversion, upgrading a strip center, or repositioning a mixed-use asset, OZ 2.0 can supercharge your returns. Call or DM me for more information.
Could your retail property’s highest and best use now be an apartment or mixed-use project that maximizes OZ 2.0’s permanent benefits?
#CommercialRealEstate #OpportunityZones2025 #OZ2 #MixedUseDevelopment #RetailToResidential
Footnotes & Sources
- NAHB – “Opportunity Zones in the One Big Beautiful Bill Act”
- Local Infrastructure Hub – “Guide to the New Opportunity Zones”
- International Economic Development Council – “OZ Program Overhaul”
- Barron’s – “Capital Gains Tax Break in Opportunity Zones”
- Seyfarth Shaw – “7 Key Changes to the QOZ Incentive”
- Barron’s – “Capital Gains Tax Break in Opportunity Zones”
- Kiplinger – “Opportunity Zones Changes in the Big Beautiful Bill” and RSM US – “OBBBA Tax Opportunity Zones”
This content is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Landlords, tenants, and property owners should consult with qualified legal counsel or tax professionals to understand how California AB 380 and related regulations apply to their specific situation. No attorney-client or fiduciary relationship is created by this communication.
© 2025 Marc Perlof Group. All rights reserved.
Retail Real Estate 2026: Why Some Properties Stay Strong While Others Struggle By Marc Perlof | MarcRetailGuy February 2, 2026 If you own retail real estate, here is what just changed. Retail real estate in 2026 is no longer one market. It has split into clear winners and clear losers. Owners who understand this are protecting value. Owners who do not are feeling pressure. The biggest change is how people spend money when things feel uncertain. Interest rates are higher. Costs are up. Households are more careful. That shift shows up first at the property level. Some retail feels stress faster than others. Lifestyle centers, nightlife areas, entertainment districts, and tourist retail depend on optional spending. When people cut back, visits drop. Sales slow. Tenants push back on rent. Vacancies last longer. This is not a crash. It is a pressure issue tied to spending people can delay. Other retail performs differently. Grocery anchored centers, pharmacies, medical and dental, quick-service food, auto service, and personal care are built around daily habits. People cut wants before needs. That makes income steadier and easier to support in a cautious market. Recent retail market reports show this split clearly. National retail vacancy stayed fairly stable through late 2025, mostly in the mid-5 percent to high-6 percent range, with necessity-based centers performing better than discretionary locations¹. Leasing slowed in 2025, with longer decision times and more rent pushback, especially from non-essential tenants². Buyers are still active, but they are more careful. They now focus on tenant quality, lease length, and operating costs more than rent growth³. What retail owners should focus on right now • Daily-needs tenants reduce risk. Properties with grocery, medical, pharmacy, and quick-service food see more stable rent and fewer concession requests. That helps protect sale price and lender support in slower markets¹. • Grocery-anchored centers sell faster. Buyers still want these assets because traffic is predictable and costs are easier to pass through. These deals tend to fall apart less often³. • Discretionary retail carries pricing risk. Properties tied to optional spending face longer vacancies, rent resistance at renewal, and wider gaps between buyer and seller pricing. Waiting too long to adjust can hurt value, not just cash flow². One thing is becoming clear in early 2026. The market is not pricing retail as one category anymore. It is pricing risk. Two properties with the same income can be worth very different amounts based on tenant mix, lease terms, and rising expenses. Owners who understand this protect equity. Others only see the gap after a buyer or lender points it out. The takeaway is simple. Retail real estate in 2026 is about quality, not hype. Stable income matters. Lease terms matter. Tenant mix matters. Insurance and operating costs matter. Owners who match strategy to how their tenants actually perform stay in control. Owners who rely on old assumptions end up reacting. If you want a clear, property-specific review of how buyers and lenders would view your retail asset today, I can prepare a short market positioning summary. No templates. No guesses. Just how your property would really trade in this market. Ask yourself this. Is your property built around spending people can delay, or spending they rely on every week? #RetailRealEstate2026 #RetailMarketOutlook #EssentialServicesRetail #GroceryAnchoredRetailCenters #DiscretionaryRetailProperties
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By Marc Perlof | MarcRetailGuy January 26, 2026 If you own retail real estate, here’s what just changed for you. 2026 is shaping up to be a year where retail property owners need to pay attention. Not to fear. Not to headlines. To real signals in the market. There is more global and domestic uncertainty right now. Conflicts overseas, trade tension, higher government debt, and political changes in the U.S. all affect interest rates, insurance markets, and investor behavior. This does not mean panic. It means owners need clear, reliable information. Here is where the retail market stands today. Local retail remained steady through late 2025. In Los Angeles County, vacancy ranged from about 5.6 to 6.9 percent in the second half of the year¹²³. That tells us demand is still healthy, even as some tenants adjust space needs or renew leases at new rent levels. Leasing activity slowed in some areas. Spaces are taking longer to fill, and asking rents softened slightly as owners and tenants reset pricing². This is a normal market adjustment, not a collapse. On the investment side, commercial real estate transactions increased nationally through mid 2025. Both the number of deals and total dollar volume rose, showing capital is still moving⁵. Buyers are active when pricing reflects today’s risks and returns. This is exactly what I am seeing in live pricing discussions and negotiations right now. Insurance remains one of the biggest issues for retail owners. Property insurance markets became more stable in 2025, and rate increases slowed in some areas. However, insurers are still selective. Coverage terms matter more than ever, especially for properties exposed to wildfire or coastal risk⁴. Insurance costs directly affect net income, lease negotiations, and buyer interest. Retail Outlook for Q1 and Q2 2026 In early 2026, the retail market is likely to stay steady but measured. Vacancy is expected to remain near current levels. Leasing will be deliberate, not rushed. Rents should hold close to where they ended in 2025 as owners and tenants continue to agree on realistic pricing. Capital will remain active for properties with solid income, strong tenant credit, and durable lease terms. Buyers are selective, but they are still moving forward when risk and return are properly aligned. Insurance markets will stay selective in the first half of 2026. Owners need to plan renewals carefully and understand how insurance affects operating costs, tenant negotiations, and future sale value. Here is a simple retail risk check for 2026: • Local vacancy around 6 percent, stable but uneven by location¹ • Leasing takes longer than peak years, making pricing discipline critical² • Capital remains active, but underwriting is conservative⁵ • Insurance coverage is improving in some areas, but terms still matter⁴ Not all retail performs the same. Discretionary-driven destinations like lifestyle centers, nightlife districts, and tourist-focused shopping streets feel more pressure when consumer spending slows. Retail that serves daily needs and essential services tends to perform better during uncertain cycles. The best strategy now is disciplined and data-driven. Focus on tenant credit strength. Protect lease term and income stability. Price based on real market data. Understand insurance risk clearly. This is how value is protected in changing markets. I help retail property owners position assets based on real tenant behavior and real buyer demand. Not headlines. Call or DM me if you want a clear view of how your retail property should be positioned for 2026. How will you adjust your leasing or investment strategy this year based on what the market is actually telling us? #RetailRealEstate #LosAngelesCRE #CommercialRealEstateOutlook #RetailInvestment #CRE2026 #MarcRetailGuy
