Aggregated 2024 vs. 2025 Trends
Overall, exchange activity showed a modest contraction in 2025 YTD compared to the same period in 2024
- Through Q3, total exchanges declined by 4.4% year-over-year, indicating slightly reduced market activity
- Total contractual value of sales in 1031 Exchanges rose 19.9%, while purchase value dropped 11.5%, highlighting a market shift toward larger relinquished asset dispositions and more cautious replacement acquisitions
Key Takeaways
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- Higher Value per Transaction
Average deal sizes have increased materially, evidenced by the nearly 20% rise in both sales values. - Fewer but Larger Transactions
Total exchanges were down 4–5% YoY, while aggregate value climbed, showing smaller investors are continuing to hold on to property in lieu of exchanging. - Increased Identification Challenges
Failure-to-ID Replacement Property during the 45-day Identification Period increased from 6% to 9% for all exchanges, reflecting supply-demand imbalances in Replacement Property options. - Reduced “Boot” Activity
A 7% decline in exchanges with greater than $100k in “boot”, the taxable portion of exchange funds not utilized to acquired Replacement Property within a 1031 Exchange, signals better reinvestment discipline especially when viewed in combination with the increase in exchanges that failed to ID.
- Higher Value per Transaction
The aggregated 2025 data illustrates a picture of a more selective, value-focused 1031 Exchange environment. Investors are executing fewer total transactions but targeting larger, higher-quality assets. At the same time, disciplined reinvestment and tighter property identification underscore a more strategic approach to exchange management.
2026 Forecast of the 1031 Exchange Landscape
As we look ahead the outlook for 1031 Exchanges in 2026 appears broadly positive, shaped by the anticipated reduction in interest rates. As the Federal Reserve continues easing short-term policy rates, borrowing costs are expected to decline, making it more feasible for investors to finance Replacement Properties and structure tax-deferred exchanges. This easing should stimulate renewed activity, particularly among investors who had postponed exchanges during the period of elevated interest rates.
At the same time, certain property sectors—especially multifamily and industrial—are showing signs of renewed stability, with rent growth returning and vacancy pressures easing. These improvements create more attractive opportunities for “like-kind” Replacement Properties, particularly in income-producing asset classes that align well with long-term exchange strategies. The core tax-deferral incentive of a 1031 Exchange remains a strong driver for investors seeking to rebalance portfolios while managing capital gains exposure, and as appreciation moderates, the appeal of deferring taxation while moving into more productive assets may grow.
Overall, 2026 is expected to be a favorable year for property owners looking to leverage 1031 exchanges, with moderating rates and a more balanced real estate market providing new opportunities for strategic repositioning. The environment, however, will likely remain less exuberant than past boom periods, requiring disciplined underwriting, careful property selection, and prudent leverage. Investors who focus on stable, income-generating sectors. In short, while 2026 may not bring explosive growth, it promises a steady and strategically advantageous landscape for 1031 investors ready to act thoughtfully in a changing market.