By David Gould, CEO, FarmTogether

The market for 1031 exchanges is becoming more active in 2026. Transaction volume is increasing, commercial real estate activity is recovering, and more capital is moving through exchanges at higher property values. At the same time, the 45-day identification period remains unchanged, leaving a relatively short window to evaluate replacement property as market activity picks up. 

Data from Accruit’s network of more than 30 national Qualified Intermediaries shows that 1031 exchange volume increased 12.4% year over year during the first half of 2026. Average relinquished-property values increased 13.5%, while replacement-property values rose 10.1%. The data points to a 1031 market that has regained activity following several years of higher borrowing costs and slower commercial real estate transactions. 

The broader real estate market is moving in a similar direction. CBRE’s 2026 U.S. Real Estate Market Outlook forecasts a 16% increase in U.S. commercial real estate investment volume in 2026, bringing activity close to its pre-pandemic annual average. With more transactions moving through the market, the environment surrounding 1031 exchanges looks different from the slower transaction markets of the past several years. 

More 1031 Exchanges Are Moving Through the Market 

The increase in exchange activity is notable because the mechanics of Section 1031 have remained largely the same. Under Section 1031 of the Internal Revenue Code, qualifying real property held for investment or productive use in a trade or business can be exchanged for other qualifying like-kind real property without recognizing the gain or loss at the time of the exchange, subject to applicable requirements. 

IPX1031’s 2026 outlook identifies portfolio repositioning, tax efficiency, and long-term planning among the themes influencing exchange activity this year. The firm also points to continued interest in replacement investments that reduce direct management responsibilities. 

The timeline remains one of the defining features of the process. Replacement property generally must be identified within 45 days after the relinquished property is transferred and acquired within 180 days, or by the applicable tax-return deadline if earlier. 

Those deadlines apply regardless of what is happening in the real estate market. As transaction activity increases, the number and types of properties moving through the replacement-property market can change, but the amount of time available for identification does not.

Replacement Property Is Receiving More Attention

The current environment has placed more focus on the replacement side of the exchange. 

This has expanded the conversation beyond finding another property similar to the one being sold. Section 1031 provides considerable flexibility in what constitutes like-kind real estate. Under IRS guidance, real properties can qualify as like-kind even when they differ in grade or quality. The IRS specifically identifies city property exchanged for farm property as one example. 

That flexibility opens a relatively broad replacement-property universe. Depending on the transaction and ownership structure, qualifying property can span different real estate sectors and geographic markets. 

Professionally Managed Replacement Property 

Within this broader replacement-property market, certain ownership structures can provide direct ownership in real estate without requiring an owner to manage the property day to day. 

One example is a tenancy-in-common, or TIC, structure, in which multiple owners hold fractional interests directly in the underlying real property. When structured appropriately, a TIC interest may qualify as replacement property for a 1031 exchange because the exchanger owns an interest in the real estate itself rather than an interest in a partnership. 

The IRS has provided guidance on the circumstances under which co-ownership arrangements may be treated as interests in real property rather than business entities for federal tax purposes. Revenue Procedure 2002-22, for example, outlines conditions the IRS considers when evaluating tenancy-in-common arrangements. 

TIC ownership represents another way replacement property can be held without requiring the acquisition of an entire property. Depending on the arrangement, property management and operating responsibilities may also be handled by third-party professionals. 

The qualification of a TIC interest for Section 1031 treatment depends on the specific ownership structure and transaction. Partnership interests are generally excluded from Section 1031, making the legal and tax structure an important consideration when evaluating fractional replacement property. 

Where Farmland Fits Into the Replacement-Property Market 

Farmland represents one part of this broader replacement-property universe. Its relevance to a 1031 exchange comes from its status as real property rather than from agriculture alone. As noted in IRS Publication 544, city real estate and farm property are specifically used as an example of properties that can qualify as like-kind. 

For someone exchanging out of multifamily, retail, office, industrial, rental, or other investment real estate, farmland introduces a property type with different underlying economics. Agricultural production, land values, water resources, crop markets, operating costs, and farm management influence performance rather than rents and tenant occupancy alone.

Professionally managed farmland can also provide a different ownership experience from directly operating a rental or commercial property. The specific tax treatment, however, depends on the ownership structure used to acquire the real estate, making the structure of the investment relevant to its potential use in a 1031 exchange. 

A More Active 1031 Market in 2026 

The first half of 2026 has brought more activity back into the 1031 market. Exchange volumes are higher, average transaction values have increased, and commercial real estate investment activity is recovering more broadly. At the same time, replacement-property selection continues to take place within the same 45-day identification period established under Section 1031. 

The range of replacement property available within that framework is broad. The like-kind standard can accommodate different types of qualifying real estate across sectors and geographies, while ownership structures can also vary depending on the transaction. 

For those considering a 1031 exchange in 2026, the changing market provides useful context for evaluating replacement property. Higher transaction activity, a fixed identification timeline, and a wide range of qualifying real estate are all shaping the environment in which exchanges are taking place. 

This material is for informational purposes only and should not be construed as tax, legal, or investment advice. The availability and tax treatment of a 1031 exchange depend on individual circumstances and the structure of the transaction. Please consult with your tax and legal advisors and a qualified intermediary regarding your specific circumstances.

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