The CRE and 1031 Landscape Heading Into 2026
As we move into 2026, the commercial real estate (CRE) market and the 1031 Exchange landscape are entering a new phase. After navigating several years of higher interest rates, limited inventory, and market uncertainty, investors and property owners are beginning to see signs of stabilization and opportunity.
While challenges remain, improving financing conditions and shifting investor behavior are laying the groundwork for increased transaction activity. Staying informed on emerging trends will be critical for investors and their advisory teams as they plan strategically for the year ahead.
This outlook incorporates 2026 CRE industry expectations along with insights from IPX1031 Exchange experts who work daily with investors and advisors across a wide range of transaction types.
What Can We Expect in 2026?
Following the hurdles faced in 2024 and an uneven recovery in 2025, several key themes are beginning to take shape for 2026:
Interest Rate Stabilization
Interest rate stabilization is expected to support increased real estate transaction volume. As borrowing costs ease, more investors are likely to re-enter the market, driving renewed interest in 1031 Exchanges as a tax-deferral strategy.
Larger Deal Sizes Are Returning
Larger deal sizes are returning as confidence improves. These transactions often involve more complex structures, requiring earlier planning and closer coordination among tax advisors, attorneys, and Qualified Intermediaries.
Limited CRE Inventory Remains a Challenge
Limited CRE inventory remains a challenge, particularly in desirable markets. As a result, Reverse Exchanges, where investors acquire Replacement Property before selling their Relinquished Property, are becoming an increasingly important tool.
Growing Demand for Management-Free Investments
Growing demand for management-free investments, especially Delaware Statutory Trusts (DSTs) and Triple Net Lease (NNN) properties. Baby Boomers and other investors are prioritizing passive income, estate planning flexibility, and simplified ownership.
Capital Migration Continues
Capital migration continues, with investors selling assets in high-regulation markets such as New York City and Los Angeles and reinvesting in more landlord-friendly regions—particularly across the Southeast.
Commercial Transactions Are Generally Rebounding Faster Than Residential
Commercial transactions are generally rebounding faster than residential, as some residential markets experience temporary slowdowns while CRE demand improves.
Tax Policy Remains a Watch Point
Tax policy remains a watch point. Although there were no changes to Section 1031 in 2025, future legislative proposals could impact 1031 Exchanges. IPX1031, the Federation of Exchange Accommodators (FEA), and industry advocates continue to educate lawmakers on the economic benefits of 1031 Exchanges, with the goal of preserving the law in its current form. Investors can stay informed by signing up for Save1031 updates.
Strategic 1031 Takeaways for Investors in 2026
Successful exchangers in 2026 will align market timing, asset selection, and tax strategy rather than treating the exchange as a reactive process.
- Plan earlier: Begin Replacement Property selection well before disposition
- Diversify intentionally: Use 1031 Exchanges to rebalance portfolios
- Stay compliant: Regulatory precision is non-negotiable
- Work with specialists: Experienced exchange experts and industry advisors add measurable value
Anticipated 1031 Exchange Trends for 2026
Reverse and Improvement (Build-to-Suit) Exchanges
Reverse Exchanges are expected to remain steady due to continued inventory constraints in both residential and commercial markets. At the same time, Improvement (Build-to-Suit) Exchanges are becoming more common.
Larger, More Complex Transactions
As transaction sizes grow, exchanges are becoming more complex. Partnership issues, estate planning considerations, and regulatory nuances are driving greater involvement from tax attorneys and CPAs.
Geographic Shifts in Investment Activity
Out-of-state investment into the Southeast in markets such as North Carolina, South Carolina and Georgia is expected to continue, with New York-based investors now surpassing California as a source of inbound capital.
Rising Demand for Passive Replacement Property
DSTs and NNN properties continue to gain traction as preferred replacement options. Investors are increasingly exchanging out of management-intensive assets in favor of predictable cash flow and reduced operational responsibility.
Interest Rates and Transaction Volume
Declining interest rates are expected to support an estimated 20% year-over-year increase in real estate transaction volume, driving higher 1031 Exchange activity across both commercial and residential assets.
Estate Planning–Driven Sales
An increasing number of investors, particularly partnerships are selling assets for estate planning purposes, using 1031 Exchanges to separate ownership interests and reposition capital more strategically.
CRE Class Performance Shaping Exchange Strategy
Sector performance continues to influence exchange behavior:
- Strong industrial and multifamily fundamentals support reinvestment
- Retail’s resilience offers income diversification
- Office dispositions continue feeding exchange pipelines
- Hospitality attracts opportunistic capital from experienced investors
1031 Looking Ahead to 2026
2026 represents a potential turning point for commercial real estate and 1031 Exchange investors. The year favors disciplined investors who combine market insight with tax-efficient execution.
As market conditions continue to evolve, the role of 1031 Exchanges as a strategic tax-deferral tool remains strong, particularly for investors navigating shifting geographies, changing asset preferences, and increasing deal complexity. For those prepared to act early, 2026 presents meaningful opportunities to reposition portfolios, defer taxes, and capitalize on a more active CRE environment.
2026 Capital Gains Tax Brackets
In 2026 the long-term capital gains rates remain the same (0%, 15% or 20%) with the breakpoints increasing for inflation. The capital gain breakpoints for 2026 based on filing status are as follows:
| Capital Gains Rate | Unmarried Individuals (Taxable Income Over) | Married Filing Jointly (Taxable Income Over) | Head of Household (Taxable Income Over) |
|---|---|---|---|
| 0% | $0 | $0 | $0 |
| 15% | $49,450 | $98,900 | $66,200 |
| 20% | $545,500 | $613,700 | $579,600 |
The capital gains brackets are based on “Taxable Income” whereas the Net Investment Income Tax thresholds are based on “Adjusted Gross Income”. To understand how capital gains may impact your exchange or sale, use the IPX1031 Capital Gains Estimator.
1031 Exchange Checklist
A 1031 Exchange transaction requires planning, expertise and support. Here’s a checklist outlining key steps in your exchange.
- Choose your 1031 Qualified Intermediary (QI)
- Consult with your tax professionals
- Include Cooperation Clause language in your purchase and sale agreement
- QI prepares your exchange documents
- Start searching for Replacement Property
- Sign all documents QI prepares
- Sell your Relinquished Property
- Identify your Replacement Property
- Enter into contract on Replacement Property
- Contact QI once Replacement Property escrow is opened
- Close on Replacement Property
- QI transfers funds to complete your purchase
- Your exchange is complete
Tax Straddling: Pay Taxes in 2026 or 2027?
If your transaction closed at the end of 2025 and you are unable to find new property to identify or purchase the property that you have identified, you may still be able to defer paying taxes on your capital gains until 2026. Since you will receive your 1031 funds back in 2026, in certain circumstances, since you did not have control/possession of your funds until 2026, the IRS may allow you to pay taxes on your 2026 tax return, which are due in 2027. This is in accordance with IRC Section 453(d) and requires your accountant to file specific tax forms. Ask your accountant if you are eligible to take advantage of this “mini” tax deferral.
IPX1031 – Choose the Experts
IPX1031 is the largest and one of the oldest Qualified Intermediaries in the United States. As a wholly owned subsidiary of Fidelity National Financial (NYSE:FNF), a Fortune 500 company, IPX1031 provides industry leading security for your exchange funds as well as considerable expertise and experience in facilitating all types of 1031 Exchanges. Our nationwide staff, which includes industry experts, veteran attorneys and accountants, are available to help you and your legal and tax advisors. For additional information regarding IPX1031 and questions on 1031 Exchanges, please review:
1031 Exchange and Defer? Or Sell and Pay Taxes?
Opportunities of the 1031 Exchange
How Important is Your Qualified Intermediary?
Capital Gains Estimator
IPX1031 Knowledge Center
