DST Inventory Just Hit a Record $3.9 Billion: What 1031 Exchange Investors Should Do Next
1031 exchange investors have more options than ever to build their portfolios, making it the perfect time to be selective about which sponsors you choose to work with. Here are the risks and the questions to ask.
Meet Mike, a 67-year-old who has owned the same set of small Texas rental properties for 31 years. He's ready to step back.
The tenant calls, the late-night plumbing emergencies, the property taxes that climb every year? He's done. So he sells one of his appreciated properties (the highest-maintenance one!), and starts the 1031 exchange clock.
Forty-five days to identify a replacement property. One hundred eighty days to close.
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In the past three years, that has sometimes been a challenging window. Replacement properties have been thin on the ground. Sellers and buyers couldn't agree on the price. Lenders have been cautious. Mike, three years ago, might have spent his 45 days in a panic and pulled out, paying the tax he was trying to defer.
Today, Mike has a different problem. Not too few options — too many.
Last week, Mountain Dell Consulting reported that the Delaware statutory trust market is now sitting on the largest inventory of investable equity it has ever had. About $3.9 billion of available equity across roughly 100 DST offerings, according to Mountain Dell associate Seth Anderson, who shared the figures with Bisnow on May 29.
The previous high-water mark was $3.2 billion, recorded in May 2023. And that's just what's open for new capital. Through May 2026, sponsors had already raised an additional $3.75 billion, up nearly 24% from the same period in 2025 ... with Mountain Dell projecting $10 billion to $11 billion in total DST sales by year-end.
That is a meaningful shift. And if you're sitting on a property sale, considering a 1031 exchange, or wondering whether passive real estate makes sense in your retirement plan, you must understand what just happened.
What is a Delaware statutory trust (DST)?
If you're new to the conversation, a DST is a legal structure that holds title to commercial real estate on behalf of multiple investors. You buy a fractional interest. A professional sponsor (typically a real estate firm) handles the work: Acquisition, financing, property management and eventual sale.
The IRS confirmed in Revenue Ruling 2004-86 that a DST interest qualifies as "like-kind" replacement property under Section 1031. So an investor selling a rental house, an apartment building, an office park or raw land can roll the proceeds into a DST and defer the capital gains tax — the same as if they had bought another property directly.
The minimum investment for most DSTs is about $100,000. Some go lower, some significantly higher.
For a 1031 exchanger facing the 45-day clock, a DST is often a safety net. Increasingly, though, it's the main event.
Why DST inventory hit a record high in 2026
Two forces are pushing equity into the DST space.
The first is the supply side. Major institutional names like Ares, Hines and Blue Owl currently lead the DST market by volume, while recent entrants, including Apollo, Nuveen, Fortress and Invesco, have launched their own DST funds in the past two years.
Fortress launched its DST fund in March, targeting housing for older people, student housing and multifamily.
Nuveen rolled out a DST last year that converts property sellers into investors in its $2.1 billion nontraded real estate investment trust (REIT).
Through May 2026, Ares alone accounted for nearly 22% of all DST equity raised — more than twice the next-largest sponsor.
The second is the demand side. Replacement property inventory in the broader market is tight; financing terms have stayed expensive. The bid-ask gap between sellers and buyers has been wide enough to kill plenty of deals.
First American Exchange Company, a national qualified intermediary, reported that its DST transaction volume rose 55% from 2025 to 2026. President Julie Baird told Bisnow the 1031 market is "fundamentally different than it was even five years ago."
Investors are choosing the certainty of a fully structured, professionally managed property over the uncertainty of chasing a direct deal in a difficult market.
What the record DST market means for 1031 exchange investors
Three things change when there is $3.9 billion in inventory, rather than $2 billion, waiting for capital.
First, you have selection power. You can be picky. You can compare a multifamily DST in Phoenix against a net-lease retail DST in Charlotte, against an industrial DST outside Atlanta.
Five years ago, 1031 exchangers were grateful for any DST they could close on inside the 45-day window.
Today, you can build a small portfolio across asset classes and geographies inside a single exchange.
Second, sponsor quality matters more than ever. When inventory was tight, you took what was available. With this much equity competing for investor attention, sponsors have to put their best deals forward to differentiate.
That said, not every offering on the market is a good one. The 1031 timeline pressures investors into decisions, and sponsors know it. Some offerings still arrive with thin reserves, optimistic distribution projections or debt that will be in trouble at the next refinance. It's critical to differentiate.
Third, and this is the one Mike cares about, DSTs are increasingly being used as a starting point for a longer wealth strategy, not just a one-time tax move. Some DST sponsors are affiliated with REITs and offer a future exit through a 721 UPREIT, in which DST holders contribute their interests into a REIT's operating partnership in exchange for partnership units. Tax-deferred.
That is a separate and complex topic — one I wrote about in my article Can You 1031 Exchange into a REIT? — in which the exit options are wider than they used to be.
DST investment risks every 1031 exchanger should know
A record inventory is good news for buyers … but it's not a free pass.
A handful of DST sponsors have had financial trouble in recent years. Properties carrying debt placed in 2020 or 2021 (when borrowing was cheaper) are facing refinancing realities that the original projections never modeled.
Some vintage 2019 and 2020 DSTs have struggled to deliver the distributions investors were originally shown.
Baird at First American said it plainly to Bisnow: "There have been some DST sponsors that have had some financial challenges, and so it really is incumbent upon those interested in those types of investments to understand the mechanics of the transaction and who's backing it."
That is the right framing.
5 questions to ask before investing in a DST
If you're evaluating a DST inside a 1031 exchange, or evaluating whether to consider one at all, here are five questions I would put on the table before signing anything.
1. Who is the sponsor, and how have they performed on prior DSTs over the past 10 years? Not their pitch deck. Their record.
2. What is the debt structure on the underlying property, and when does the loan mature? If the loan matures during a tough rate environment, the projected returns may not survive the refinance.
3. What does the lease tail look like? If a major tenant's lease expires in three years and the DST's expected hold is seven years, somebody is going to have to re-lease the space.
4. What is the income yield investors should reasonably expect, net of all fees? Not the gross number on the cover page. The net.
5. What happens if the property doesn't perform? Reserves, contingencies, sponsor obligations. Read those sections of the offering documents twice.
These are not "gotcha" questions — these are the basics. A sponsor who answers them clearly is a sponsor worth considering.
A sponsor who deflects is telling you something.
How to evaluate today's DST market in a 1031 exchange
Anderson at Mountain Dell told Bisnow he expects the DST market to remain in a "heightened level of sensitivity for the next three or four years." For investors, that sensitivity is an opportunity dressed in caution.
Mike, our 67-year-old hypothetical seller, will close his 1031 exchange this summer with three DST positions across two states. He will trade his late-night plumbing calls for monthly distributions. He will keep his deferred tax intact.
And because of the basis step-up at death, he will be in a stronger position to pass real estate equity to his children than he was with the rental properties he had 10 years ago.
That outcome is available to more investors than ever before in the history of the DST market.
The bigger questions are whether it fits your specific situation and which of the 100-plus current offerings are worth your money.
That is the conversation worth having before inventory tightens up again. (Which, historically, it always eventually does.)
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