Commercial real estate investors are among the most active users of 1031 exchanges. Whether you own an office building, retail center, industrial warehouse, hotel, or apartment complex, a 1031 exchange allows you to defer capital gains taxes and depreciation recapture and reinvest your full equity into a larger or more strategic asset. We handle commercial exchanges of all types and sizes nationwide.
Commercial Property Types We Handle
We facilitate exchanges for every category of commercial real estate, including properties with complex ownership structures, multiple tenants, and significant depreciation recapture. Each property type has its own exchange considerations — select a category below for detailed guidance.
- Office buildings and business parks
- Retail shopping centers and strip malls
- Industrial warehouses and distribution centers
- Hotels, motels, and hospitality properties
- Multi-family apartment complexes (5+ units)
- NNN and triple net lease properties
- Mixed-use commercial/residential buildings
Depreciation Recapture in Commercial Exchanges
Commercial properties are depreciated over 39 years under MACRS. If you have owned your property for several years, you likely have substantial accumulated depreciation that would be recaptured at 25% upon sale. A 1031 exchange defers both the capital gains tax and the depreciation recapture tax, allowing your full equity to compound in the replacement property.
DST and TIC Replacement Options
If you want to exit active management, Delaware Statutory Trusts (DSTs) and Tenancy-in-Common (TIC) arrangements allow you to exchange into passive commercial real estate investments that still qualify as like-kind replacement property under Section 1031. These structures are particularly popular with commercial investors who want to simplify their portfolio.
Why Attorney-Led Matters for Commercial Exchanges
Commercial exchanges involve larger dollar amounts, more complex ownership structures, and greater IRS scrutiny than residential exchanges. Having an attorney serve as your qualified intermediary means every document is reviewed for legal compliance, not just exchange compliance. Steve Wolterman, Esq., CES has handled commercial exchanges across all property types and all 50 states.
Frequently Asked Questions
All commercial real estate held for investment or business use qualifies, including office buildings, retail centers, industrial warehouses, hotels, apartment complexes with five or more units, NNN properties, and mixed-use buildings. The IRS requires that the property be held for investment or productive use in a trade or business, not for personal use.