Securitized 1031 Exchanges Headed Towards A Record-Breaking Year

Delaware Statutory Trust (DSTs) are growing in popularity with accredited investors.

The DI Wire recently published statistics from Mountain Dell Consulting, a market research and analytics firm, indicating that securitized 1031 exchange offerings have raised a record-breaking $4.53 billion as of the third quarter of 2021.

“The 1031/DST market experienced two years of solid growth with $3.4 billion in equity raised in 2019 and $3.1 raised in 2020,” according to Mountain Dell Consulting. The firm forecasts an increase to $4 billion in total equity raised for 2021. DST investing will likely accelerate further as potential tax law changes loom.

Capital Square Founder and CEO Louis Rogers reports, “The amount of activity the firm has seen during the first three months has been off the charts… we were aiming for $400 million in equity in 2021, which is over $1 billion in real estate, and I think we underestimated,” he says. “I think it is going to be the strongest year ever.”

A robust housing market has fueled this growth. Many real estate investors realized large capital gains in 2021, and are seeking replacement properties that qualify under 1031 exchange rules. DSTs provide an opportunity for investors to avail themselves of 1031 tax benefits, while avoiding the active management that is associated with a traditional 1031 exchange.

According to Mountain Dell, the most popular current fractionalized 1031 asset classes are:

  • Multifamily, with $2B in equity raised this year;
  • Retail, with $671.5MM in equity raised this year;
  • Industrial, with $599.5MM in equity raised this year;
  • Self-storage, with $304.4MM in equity raised this year;
  • Office, with $218.5MM in equity raised this year.
Michael Johnston
Michael Johnston

Michael Johnson is co-founder and lead analyst at AltsDb, with over a decade of experience in financial research. He resides in Oregon.