San Diego Convention Center $400M Crisis: Downtown Property Owners Exit Before Values Drop

The $400 Million Infrastructure Time Bomb

In January 2026, city officials confirmed what insiders have known for years: the San Diego Convention Center is literally crumbling. The facility faces $400 million in needed capital investment over the next 20 years, with $200 million in deferred repair work required over just the next five years. More urgently, $170 million in critical repairs must be addressed immediately to prevent catastrophic facility failures.

The Convention Center Corp. has identified several emergency-level issues:

• Central Plant Replacement: The single most expensive near-term project is the complete replacement of the central plant that houses the facility's entire cooling and heating system, carrying a staggering $66 million price tag
• Roof Replacement: The roof in the original part of the building requires complete replacement at an estimated cost of $10.3 million
• Generator Replacement: Critical backup power systems need immediate replacement
• Elevator Modernization: Aging elevator systems require comprehensive upgrades
• Fire and Life Safety Improvements: Code compliance and safety systems need major investment

These aren't theoretical problems. Just before Comic-Con 2023, a critical air conditioning unit failed, forcing officials to spend over $200,000 in five days to save the event. During a recent orthopaedic surgeons' convention, rainwater poured onto crowded exhibit floors. These failures could soon become unmanageable, potentially costing millions in lost revenue and economic impact.

Measure C: The Funding Solution That Created New Uncertainty

In March 2020, San Diego voters approved Measure C, a hotel tax increase designed to fund Convention Center expansion, homeless programs, and road repairs. The measure garnered 65.24% support but appeared to fail initially, as voters were told a two-thirds supermajority was required. After five years of litigation, courts ultimately ruled that a simple majority was sufficient for citizen-initiated tax measures.

The tax structure creates three zones based on proximity to the Convention Center:

*Note: An additional 2% tourism marketing surcharge applies to all properties, bringing the effective rate for downtown Gaslamp Quarter hotels to 15.75%.*

Revenue Projections vs. Reality

When litigation finally ended in November 2025, the city began releasing accumulated tax revenue. Initial projections told a sobering story:

• Fiscal Year 2026 Actual Revenue: $77 million (down from initial $82 million projection)
• Convention Center Allocation: $45.4 million
• Homeless Programs Allocation: $31.5 million
• 10-Year Projection: $1.04 billion
• 42-Year Total Estimate: $4 billion for expansion, $2.1 billion for homeless initiatives, $650 million for road repairs

The problem? The Convention Center's infrastructure needs alone consume nearly all allocated funds, leaving virtually nothing for the promised expansion that voters were sold.

The Fifth Avenue Landing Paralysis: A Development Dead Zone Until 2027

Perhaps the most significant uncertainty facing downtown waterfront property owners is the Fifth Avenue Landing situation. This prime waterfront parcel, critical to any Convention Center expansion, remains locked in a settlement agreement that prevents city officials from even discussing development plans until the current lease expires in mid-2027.

As Convention Center Corp. CEO Rip Rippetoe stated in January 2026: "In light of the settlement agreement with (Fifth Avenue Landing), in 2026, we cannot do anything to plan for the project."

The Tortured History

The Fifth Avenue Landing saga spans decades:

• Pre-2018: City and Convention Center Corp. worked with Fifth Avenue Landing to regain control of the leasehold
• 2018: Settlement agreement reached, conditioned on expected November 2019 public vote
• 2016-2020: $455 million hotel development proposed, including a 500-room hotel, 600 parking spaces, ground-level promenade, and elevated terrace
• December 2020: Port commissioners rejected the hotel project in a 5-2 vote, despite it being the port's first-ever proposal for affordable lodging
• 2021-2025: Site remains in limbo under settlement agreement
• Mid-2027: Current lease expires, potentially opening the door for new development or expansion planning

This development paralysis creates a "dead zone" effect for nearby properties. Developers, investors, and property owners cannot plan with confidence when a critical waterfront parcel's future remains uncertain for another 18+ months.

Economic Impact: What's at Stake for Downtown

The Convention Center isn't just a building—it's a critical economic engine for downtown San Diego. Understanding the scale of impact helps explain why infrastructure failures and expansion uncertainty directly affect property values:

Annual Economic Impact

• Fiscal Year 2024: 80 meetings and conventions generated a record-breaking $1.5 billion in regional economic impact
• Comic-Con 2025 Alone: Estimated $160+ million regional economic impact, with attendees spending $96.8 million directly
• Tax Revenue: Comic-Con generated approximately $3.2 million in city taxes in a single event
• Attendee Volume: Major events like Comic-Con draw more than 135,000 attendees and media from over 20 countries

Beneficiaries Across Downtown Neighborhoods

Convention Center activity creates a ripple effect throughout downtown:

• Gaslamp Quarter: Restaurants, bars, retail shops experience massive traffic increases during major conventions
• Marina District: Hotels, particularly luxury properties, operate at or near capacity during events
• East Village: Transportation providers, Uber/Lyft drivers, parking facilities see significant demand spikes
• Little Italy: Restaurants and entertainment venues capture overflow dining and nightlife traffic
• Downtown Broadly: AV companies, printers, designers, photographers, caterers, grocery stores, dry cleaners, and gas stations all benefit

One comic book store owner reported a 400% sales increase during Comic-Con week: "It is bigger than Christmas, it is bigger than Black Friday. It is far and away our busiest week of the year."

How Infrastructure Uncertainty Affects Property Values

For property owners in downtown neighborhoods, the Convention Center's uncertain future creates multiple pressure points:

1. Direct Proximity Impact

Properties within the highest hotel tax zone (13.75% rate) face competitive disadvantages:

• Higher operating costs for hotel properties
• Price sensitivity among business travelers and tourists
• Potential shift of bookings to lower-tax zones outside downtown
• Reduced profitability margins for hospitality investments

2. Development Financing Challenges

The Fifth Avenue Landing paralysis and expansion uncertainty create financing headwinds:

• Lenders more cautious about waterfront development projects
• Commercial property valuations incorporate "uncertainty discount"
• Mixed-use development projects face longer approval timelines
• Investment capital flows to more certain markets (UTC, Mission Valley, North County)

3. Event Risk Exposure

Facility failures pose real business continuity risks:

• Major events could relocate if infrastructure proves unreliable
• Comic-Con's contract with San Diego expires in 2026 (renewable through 2028, with options through 2030)
• Competing convention centers in Los Angeles, Las Vegas, Anaheim actively recruit San Diego events
• Each lost major event represents millions in lost economic impact for downtown businesses

4. Market Perception and Momentum

Real estate markets trade on confidence and momentum:

• Negative headlines about crumbling infrastructure create psychological headwinds
• Institutional investors prefer markets with clear growth trajectories
• Retail and restaurant tenants hesitate on new leases amid foot traffic uncertainty
• Property owners face longer marketing periods and more buyer due diligence questions

Downtown San Diego Property Market: Current Conditions

Despite the Convention Center uncertainties, downtown San Diego property values have remained relatively resilient through early 2026, though market dynamics are shifting:

Gaslamp Quarter

• Property Types: Primarily condos, lofts, and townhouses
• Price Range: $639,000 to $2.8 million (penthouse units)
• Market Dynamics: Investors capitalizing on rental demand and short-term rental opportunities near waterfront
• Concern: Highest exposure to hotel tax impact and Convention Center event risk

Marina District

• Property Types: Luxury high-rises including Pinnacle Museum Tower, Meridian, Renaissance, Harbor Club, and Park Place
• Market Position: Premier luxury condominium market with waterfront access
• Price Point: Higher-end segment serving affluent buyers
• Concern: Direct proximity to Fifth Avenue Landing uncertainty

East Village

• Property Types: Mixed-use developments, converted lofts, newer condo buildings
• Market Dynamics: Urban lifestyle buyers, Petco Park proximity provides diversification
• Price Point: More accessible entry points than Marina District
• Concern: Convention Center foot traffic supports retail and restaurant tenants

Overall Market Conditions

• San Diego County Median: $925,000 (as of early 2026)
• Market Status: Stabilized after years of rapid appreciation
• Supply Dynamics: Limited housing supply continues supporting values
• Investment Activity: Rental demand remains strong, but uncertainty creates hesitation among new investors

Why Cash Buyers Offer a Strategic Exit

Savvy downtown property owners are increasingly exploring cash sale options as a risk management strategy. Here's why this approach makes sense in the current environment:

1. Certainty of Execution

Conventional sales face multiple contingencies:

• Buyer financing subject to appraisal risk (appraisers incorporate uncertainty into valuations)
• Longer due diligence periods allow buyers to renegotiate based on negative news
• Inspection contingencies create opportunities for price reductions
• Market condition changes during 60-90 day closing periods

Cash buyers eliminate these variables with:

• 7-14 day closing timelines
• No financing contingencies or appraisal requirements
• As-is purchases with minimal inspection contingencies
• Binding contracts with significant earnest money deposits

2. Optimal Timing

Property owners selling now (early 2026) can capture value before:

• Mid-2027 Fifth Avenue Landing lease expiration reveals expansion plans (or lack thereof)
• Infrastructure failures potentially impact major events
• Multi-year repair projects create construction disruption and noise
• Hotel tax impacts fully materialize in tourism booking patterns
• Measure C revenue shortfalls potentially trigger tax increases or service cuts

3. Capital Redeployment

Liquidating downtown properties now allows owners to:

• Redeploy capital to markets with clearer growth trajectories
• Diversify out of concentrated downtown exposure
• Avoid potential special assessments if infrastructure issues worsen
• Lock in gains after years of appreciation before uncertainty discount expands

4. Inheritance and Estate Planning

Many downtown property owners face:

• Aging properties requiring significant capital investment
• Estate planning needs favoring liquid assets over property management
• Multiple heirs preferring cash distribution to joint property ownership
• Tax advantages of selling before potential market correction

What Happens Next: Timeline of Critical Dates

Property owners must weigh: Do they want to navigate this 4-year period of maximum uncertainty and disruption, or exit now while values remain relatively stable?

Frequently Asked Questions

Conclusion: Navigating Downtown San Diego's Perfect Storm

The San Diego Convention Center's $400 million infrastructure crisis, combined with Measure C funding shortfalls and Fifth Avenue Landing development paralysis, creates an unprecedented period of uncertainty for downtown property owners. While values haven't collapsed, the accumulation of risk factors—infrastructure failures, tax competitiveness challenges, expansion uncertainty through mid-2027, and years of disruptive construction ahead—represents a headwind that savvy property owners are taking seriously.

For owners in the Gaslamp Quarter, Marina District, East Village, and surrounding downtown neighborhoods, the calculus is straightforward: Do you want to navigate 3-5 years of maximum uncertainty, construction disruption, and potential value stagnation while hoping for positive resolution? Or do you want to exit now, at current values, with certainty and speed?

Cash buyers offer a strategic alternative for property owners prioritizing certainty over speculation. With 7-14 day closing timelines, no financing contingencies, and as-is purchase terms, cash sales provide a clean exit before the full market impact of the Convention Center crisis materializes.

The window for optimal exit timing is narrowing. As infrastructure failures mount, construction disruption intensifies, and the mid-2027 Fifth Avenue Landing deadline approaches, buyer sentiment and pricing power will shift. Property owners who act decisively can capture current values and redeploy capital to more certain opportunities.

The Convention Center crisis isn't a reason to panic—but it's absolutely a reason to plan.