Industrial real estate has become one of the most sought-after asset classes for 1031 exchange investors. Warehouses, distribution centers, flex industrial, and manufacturing facilities all qualify for tax-deferred exchanges, and the strong fundamentals of industrial real estate make it a popular replacement property choice for investors exiting other asset classes.
Industrial Property Types That Qualify
Any industrial property held for investment or business use qualifies for a 1031 exchange. The property type, size, and number of tenants do not affect eligibility.
- Bulk distribution and fulfillment centers
- Last-mile delivery facilities
- Flex industrial and R&D space
- Manufacturing and production facilities
- Cold storage and refrigerated warehouses
- Self-storage facilities
Exchanging Into Industrial as a Replacement Property
Industrial properties are increasingly popular as replacement properties for investors exiting retail, office, or residential assets. The combination of long-term NNN leases, strong tenant credit, and e-commerce tailwinds makes industrial a compelling exchange destination. We can help you identify qualified industrial replacement properties and coordinate the exchange.
Cost Segregation and Bonus Depreciation
Industrial properties are excellent candidates for cost segregation studies, which can accelerate depreciation on personal property components and site improvements. When combined with a 1031 exchange, cost segregation allows you to defer taxes on the gain while simultaneously generating new depreciation deductions on the replacement property.
Sale-Leaseback Transactions
Industrial sale-leaseback transactions — where a business sells its facility and leases it back from the buyer — can qualify for a 1031 exchange on the buyer's side. We have experience structuring exchanges involving sale-leaseback arrangements and can coordinate with all parties to ensure compliance.