Investment managers across the country are accelerating the launch of tax-deferred real estate investment programs as demand surges, driven by favorable market conditions, more certainty on government policy and a generational transfer of wealth.
In recent weeks, office and industrial development firm Denholtz, multifamily real estate debt specialist Forum Investment Group and retail redeveloper PREP Property Group each introduced new Delaware Statutory Trust offerings that let property sellers push off paying capital gains taxes, often as a part of estate planning. Major property investor Blackstone Real Estate Income Trust first offered a DST in November, joining other big names — Brookfield, Starwood, Nuveen, Hines and Ares Management — in adopting the structure in the past two years.
Denholtz, a privately held investor and developer targeting multitenant office and industrial properties, sees favorable market conditions of limited new supply and returning demand for space fueling renewed interest in property investment.
“The DST market is projected to have an increase of about 30% year-over-year,” Jennifer McCool, executive vice president and head of capital markets at Red Bank, New Jersey-based Denholtz, told CoStar in an email.
Forum Investment is a Denver-based multifamily firm offering investment strategies in real estate debt, private credit and equity. PREP Property, based in Cincinnati, focuses on retail redevelopment projects.
“The DST market is projected to have an increase of about 30% year-over-year.”
DST programs provide tax advantages by reinvesting real estate sale proceeds into fractional interests in institutional-grade commercial real estate. Through exchanges based on Section 1031 of the U.S. Tax Code, investors transition from actively managing properties to generating passive income streams.
Sales related to DST programs reached $7.34 billion through November, according to the latest data available from Mountain Dell Consulting, a research firm that tracks real estate investment programs. The firm projected that 2025 equity raises would hit $7.5 billion, up 33% from 2024’s $5.66 billion.
Wealth transfer fuels demand
Prior to President Donald Trump signing into law the “Big Beautiful Bill” tax and spending legislation in July, there had been significant debate about limiting the amount of capital gains an investor could defer — some proposals suggested a $500,000 cap. However, the new law maintained the status quo that investors could still defer 100% of their capital gains taxes by reinvesting in like-kind real property, meaning real estate of the same nature or character, rather than the same grade or quality.
The removal of the uncertainty allowed investors to continue planning for future exchanges.
It comes as the transfer of generational wealth is driving structural demand for DST products, according to industry professionals. Property owners are using the trusts as estate planning tools as more than $100 trillion is expected to change hands over the next two decades, McCool said.
DSTs allow investors to exit property management while maintaining tax-deferred real estate exposure.
“We believe many property owners are sitting on highly appreciated assets and facing meaningful tax exposure, while also seeking to reduce operational intensity or rebalance portfolios,” Darren Fisk, founder and CEO of Forum Investment, said in an email.
The risks of investing in DSTs are familiar to investors approaching retirement. The programs still involve tying up capital for long periods of time in assets that are not as easily sold as stocks and bonds, and the outcome of which depends on the success of the property and the sponsor.
Market conditions support growth
Even so, a limited supply of replacement properties and capital gains tax concerns are ramping up DST adoption, according to the firms. The 1031 exchange market has averaged $29.4 billion in annual deals over the past decade, according to CoStar data.
Sponsors are targeting defensive asset classes with steady cash flows.
Denholtz’s inaugural DST, DX SB Industrial I DST, owns Sweetwater Business Center, a nine-building, 225,789-square-foot shallow bay flexible industrial campus in Tampa, Florida. The offering sold out within six weeks. The money raised helped refinance the campus acquired six years ago.
Investment managers are also leveraging existing products to differentiate DST offerings. Denholtz, for example, has extended the firm’s in-house integrated capabilities — ranging from acquisitions, financing, development and management — to individual investors.
“The full subscription of DX SB Industrial I DST demonstrates investor confidence in our ability to source, underwrite and operate assets in high-growth markets,” McCool said.
For its offerings, Forum Investment plans to focus on properties with strong underlying economic elements, durable demand and the potential for long-term value creation.
“That typically includes institutional-quality multifamily assets, which is a needs-based asset class, located in markets with favorable demographic and economic trends,” Fisk said.
PREP Property seeks to sponsor necessity-driven net lease retail properties — stores such as groceries, which provide essential consumer items — targeting monthly cash flow and long-term appreciation. In a typical net lease arrangement, the tenant pays for building costs including taxes, insurance and maintenance. The firm’s inaugural offering is expected in early 2026.
“E-commerce cast a cloud over the category for the past 15 years. Armageddon never came to fruition,” Michael Phillips, CEO of PREP Property, said in a statement. “Retail real estate is experiencing its strongest fundamentals in decades, and new supply is at historic lows, making the timing ripe for investors to reposition capital into necessity retail.”