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.
Cherished Malibu Seafood Shack The Reel Inn May Rebuild After State Reversal Malibu’s one-of-a-kind seafood spot, The Reel Inn, may once again serve its signature fish puns and fried and grilled platters on Pacific Coast Highway after the state reversed its earlier position that blocked the restaurant’s return, according to Eater LA...
Hey, Retail Real Estate Rockstars! The Big Beautiful Bill (H.R. 1) has completely changed the rules for State and Local Taxes (SALT), which is great news for any property owner who has ever cringed when they see their tax bill. For those of you investing in retail real estate, this is the kind of victory that calls for a double espresso and a fresh pro forma. We're talking about actual tax relief in 2025. Let's dissect it. What Just Happened? The SALT deduction cap, once stuck at $10,000 per household, has officially increased to $40,000 for joint filers and $20,000 for single filers — but only between 2025 and 2029. After that, it’s back to the old cap unless Congress re-ups¹. Important Clarification for Property Owners While the IRS frames the new SALT cap in terms of individual filers ($20,000 single / $40,000 joint), the impact depends on how your retail property is owned: LLCs, Partnerships, and S-Corporations (Pass-Throughs): Income, expenses, and property taxes flow through to the owners’ personal returns. The higher SALT cap allows greater deductions here, boosting post-tax cash flow for the individual owners. Trusts & Estates: Similar pass-through treatment, meaning beneficiaries or trustees may capture the benefit depending on structure. C-Corporations: The SALT cap generally doesn’t apply, since corporate taxes are calculated differently and deductions follow corporate rules. REITs (Public or Private): REITs have their own tax regime, but shareholders who receive pass-through income may benefit at the individual level. Direct Individual Ownership: If you hold the property in your own name, property taxes fall directly under the SALT deduction rules. If you live in a high-tax state like California, New York, or New Jersey, this means you can deduct a lot more of your state income, property, and local sales taxes on your federal returns. Why Retail Property Owners Should Care More Deductible Property Taxes You can lower your taxable income on your federal return by deducting a larger portion of your high property taxes on retail assets. Boosts Post-Tax Cash Flow Increased deductions = less tax paid = more cash in your pocket. Offsets Reassessment or NNN CAM Spikes With inflation and property tax reassessments squeezing margins, this SALT cap increase gives you some room to breathe¹. Attractive to High-Income Buyers New investors seeking tax efficiency may find your retail property more alluring if you offer larger deductions. Strategic Planning Window: 2025–2029 These changes expire after 2029, so use this window wisely — structure sales, 1031 exchanges, or renovations when you can best leverage the deduction bump¹. Real Data, Real Impact The original SALT cap from the 2017 Tax Cuts and Jobs Act was projected to cost Californians alone over $12 billion in lost deductions annually². Nearly 30% of households in high-cost areas maxed out the previous SALT deduction limit². What About NNN Leases? Here’s the twist: if your property is on a triple-net (NNN) lease, your tenants — not you — pay the property taxes. For Landlords: The SALT cap change doesn’t directly benefit you, since you aren’t the one writing the property tax check. For Tenants: They may be able to deduct more of those property taxes on their federal returns, depending on how their business or personal tax filings are structured¹. Smart Move: Share this info with your tenants. Suggested Subject Line for Tenant Email: “You May Benefit from New Tax Deduction Rules (H.R. 1)” A simple note saying, “The new federal tax law (H.R. 1) increased the SALT deduction cap for 2025–2029. Since you pay property taxes under your NNN lease, this may be relevant for your tax planning. Please confirm with your CPA.” That small gesture positions you as knowledgeable, supportive, and proactive — which builds goodwill and strengthens tenant relationships. If you’re considering a sale, refinance, or exchange between now and 2029, let’s talk strategy while this deduction window is wide open #RetailRealEstate #CommercialRealEstate #TaxStrategy #SALTdeduction #PropertyOwners
The Iconic Reel Inn Malibu To Say Goodbye After 36 Years Plans to resurrect The Reel Inn Malibu after the Palisades Fire have been shelved following a decision by the California Department of Parks and Recreation not to renew the restaurant’s lease, as reported by The Wall Street Journal. The move effectively closes a 36-year chapter for the 144-seat seafood shack on Pacific Coast Highway, long recognizable for surfboards on the walls, clever signage, chalkboard menus, and the relaxed Malibu customers...
