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Private Investment Team
Feb 17, 20213 min read

Investment Has Picked Up in San Diego’s Opportunity Zones

Apartment Communities the Clear Favorite of Investors in These Areas

By Joshua Ohl

CoStar Analytics

February 11, 2021 | 12:01 P.M.

Even as investors have exercised caution amid the pandemic, investment activity in San Diego increased at the end of 2020 across every property sector except retail, particularly in opportunity zones.

Opportunity zones were established as part of the 2017 Tax Cuts and Jobs Act. They are a federal economic development and community development tax benefit designed to encourage long-term private investment in low-income urban, suburban and rural census tracts.

Sales volume in San Diego averaged roughly $100 million per quarter during the first three quarters of 2020 but picked up to more than $150 million during the fourth quarter, the third-highest level recorded since the opportunity zones were established. More than 50 properties in opportunity zones traded during the fourth quarter, exceeding that level for only the second time in three years.

More than half of the 56 trades during the fourth quarter involved multifamily properties, accounting for roughly $70 million in sales volume. Most of the deals were in dense, urban areas where opportunity zones in San Diego are most prevalent, particularly around the downtown area.

The largest of those deals was for Del Sol, a 32-unit community in the Golden Hill neighborhood, for $8.5 million, or about $266,000 per unit. F&F Property Management purchased it at a discount from its $9.5 million asking price.

The largest deal involved the former Thomas Jefferson School of Law. The seller, a joint venture partnership between Barings and Miller Global Properties, recapitalized and sold a 50% interest in the property for $43.5 million. The buyer, a joint venture between Barings, Phase 3 Real Estate Partners and Bain Capital, plan to fully renovate the office space into a life science property. That was one of only three office properties to sell within an opportunity zone during the fourth quarter, with the sector totaling roughly $46.5 million in volume.

The retail sector recorded about half as many trades as the apartment sector, but with only a cumulative total of $14.5 million, or roughly $1 million per transaction. Six industrial and flex properties sold in the fourth quarter for $11.5 million.

Investors are required to substantially improve an opportunity zone property during the 30-month period following the acquisition. A property is considered substantially improved if “additions to the basis of the property exceed an amount equal to the adjusted basis at the start of the 30-month period,” according to the IRS. Investors are also required to hold the property for a 10-year period to realize the full benefit of the tax deferral.

It makes sense, then, that apartment communities are the most commonly targeted asset in opportunity zones. Improving commercial buildings and attracting tenants to areas where demand is less common is more difficult than attracting renters to renovated apartment units. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner of will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.


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