The real estate market continues to create an unusual environment for investors—and we're seeing the effects firsthand in 1031 exchange transactions.
Financing challenges, changing deal economics and difficult replacement property decisions are influencing how investors approach exchanges in 2026.
Here are four trends we're watching.
1. Financing is having a significant impact on transactions
One of the clearest trends we're seeing is the impact financing can have on whether a transaction reaches the closing table.
Among our most common reasons for cancelled exchanges this year are buyers backing out of the relinquished property transaction and investors ultimately deciding not to move forward with the exchange.
Financing and inspection issues can contribute to buyer cancellations. On the replacement side, today's borrowing costs can also change the economics of a potential acquisition and make some properties less financially attractive.
For investors considering an exchange, this makes early planning particularly important. Exploring financing and potential replacement property options before the relinquished property closes can provide a clearer picture of whether an exchange is realistic.
2. The tax savings need to make sense
A 1031 exchange can provide a powerful opportunity to defer capital gains taxes—but an exchange doesn't automatically make financial sense for every investor.
We've seen investors evaluate their potential gain, estimated tax liability, available equity and replacement property options and ultimately decide they would rather take the proceeds from the sale.
That makes one question particularly important before starting an exchange:
Is the potential tax deferral meaningful enough to support your broader investment goals?
An investor's tax and financial professionals can help evaluate the numbers before the property is sold.
3. We're seeing more complicated exchange scenarios
Some of the questions coming across our team's desks this year aren't straightforward.
We're seeing situations involving:
These situations make early conversations especially valuable. Bringing a Qualified Intermediary into the process before closing can provide more time to identify potential exchange issues and coordinate with the investor's tax, legal and real estate professionals.
4. Commercial loan maturities could influence selling decisions
Another trend we're watching is the commercial real estate debt maturity wall.
A substantial amount of commercial real estate debt originated when interest rates were considerably lower is reaching maturity. For some owners, refinancing at today's rates could mean higher borrowing costs or the need to contribute additional equity.
That may leave owners evaluating several options: refinance, restructure, contribute additional capital—or sell.
For owners who ultimately decide to sell appreciated investment real estate, a 1031 exchange may become part of that conversation.
The takeaway: Do the homework before the sale
The common thread we're seeing isn't that investors should—or shouldn't—complete a 1031 exchange.
It's that the numbers and the plan need to make sense before the relinquished property closes.
Potential tax liability, financing, replacement property availability, ownership structure and the investor's longer-term goals can all affect that decision.
If you're considering selling an investment property, talking with your tax and legal advisors and an experienced Qualified Intermediary early can help you better understand your options before you're up against the 1031 exchange deadlines.
The role of Equity 1031 Exchange, LLC (formerly Midland 1031, LLC) as Qualified Intermediary is limited to acting as qualified intermediary within the meaning of Regulations section 1.1031(k)-1(g)(4) for Federal and state income tax purposes. In this regard, Equity 1031 Exchange is not providing other legal, investment, or due diligence services. The taxpayer/exchanger must direct all investment transactions and choose the investment(s) for the exchange. Nothing contained herein shall be construed as investment, legal, tax or financial advice or as a guarantee, endorsement, or certification of any investments, legal effect or tax consequences of the transfer, conveyance and exchange of the Relinquished Property and/or the Replacement Property.