Mountain Dell Consulting, a market research and analytics firm, recently reported 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 the firm. Mountain Dell forecasts an increase to $4 billion in total DST equity raised for 2021.
A robust bull market in real estate has likely fueled much of these significant inflows; 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 enjoy the tax benefits of a 1031 exchange, while avoiding the active management that is associated with exchanging into a property that the investor owns outright.
But for multifamily investors, the most interesting tidbit may be that the multifamily segment enjoyed the lion’s share of these current year inflows. 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.