When to Use a 1031 Exchange to Sell or Buy Industrial Real Estate

For many real estate investors, the 1031 exchange is one of the most powerful tools available to preserve wealth, defer taxes, and grow portfolios. But when it comes to industrial real estate, timing and strategy are everything. Knowing when (and how) to use a 1031 can make the difference between a smart reinvestment and a missed opportunity.

What Is a 1031 Exchange?

A 1031 exchange—named after Section 1031 of the IRS code—allows investors to defer paying capital gains tax when they sell one investment property and reinvest the proceeds into another “like-kind” property.

For industrial property owners, this can mean selling a warehouse, distribution center, or light industrial asset and rolling the gains into another industrial building—or even diversifying into multiple assets.

 

Benefits of Using a 1031 Exchange in Industrial Real Estate

1. Tax Deferral = More Buying Power

Instead of losing a significant portion of your profits to capital gains taxes, you can reinvest 100% of your proceeds into your next property.

2. Portfolio Growth and Diversification

Many owners use a 1031 to move from one property into multiple assets, spreading risk and improving cash flow.

3. Upgrade or Reposition Assets

It’s common for investors to exchange older industrial buildings for newer facilities with higher ceilings, better loading, or stronger tenant demand.

4. Consolidation

On the flip side, some sellers use a 1031 to trade multiple smaller properties for one larger, institutional-grade industrial asset.

Things to Watch Out For

1. Tight Timelines

You only have 45 days to identify your replacement property and 180 days to close. Without preparation, it’s easy to miss deadlines.

2. Like-Kind Requirements

Industrial to industrial is straightforward, but the rules can be nuanced. A qualified intermediary (QI) is required to facilitate the exchange.

3. Market Conditions

In competitive markets, finding a suitable replacement property within 45 days can be challenging.

When a 1031 Exchange Makes the Most Sense

A 1031 exchange is often the right move if:

  • You’re ready to scale up into a larger or better-located industrial building.

  • You want to defer taxes and maximize reinvestment power.

  • Your current property no longer fits your long-term investment strategy.

How Commercial GRP Can Help

At Commercial GRP, we work directly with industrial property owners across Connecticut and the Northeast who are considering selling. If you’re planning a 1031 exchange, our acquisitions team can:

  • Provide a fair, off-market offer for your current building.

  • Help you close quickly to stay within IRS timelines.

  • Connect you with trusted brokers, intermediaries, and lenders for your replacement property.

Thinking about selling an industrial building through a 1031 exchange? Contact Commercial GRP today to discuss your options.