Commercial Property Lost About a Fifth of Its Value. The Tax Deferred Through 1031 Exchanges Barely Moved.

The finding: We lined up two public datasets that rarely get read together: the Joint Committee on Taxation’s estimate of federal tax deferred through 1031 like-kind exchanges, and Green Street’s Commercial Property Price Index. Between the March 2022 market peak and late 2024, commercial real estate values fell 19% to 22%. Over the same stretch, the federal tax deferred through 1031 exchanges held between $10.6 and $10.9 billion a year. Prices dropped roughly a fifth. The deferral held flat.

That gap is the story. When property values slide, you might expect the tax benefit tied to selling property to shrink with them. It didn’t. Here is what the two datasets show, how we combined them, and what a flat deferral in a falling market tells you if you own investment real estate.

Dataset one: how much tax the 1031 rule defers

Each year the Joint Committee on Taxation (the nonpartisan tax scorekeeper for Congress) publishes Estimates of Federal Tax Expenditures. One line in that report covers the “deferral of gain on like-kind exchanges.” It is the government’s own estimate of the income tax that goes uncollected in a given year because investors rolled their gains into a new property under Section 1031 instead of selling outright.

The figure splits between corporations and individuals. Add them together and you get the annual scale of the deferral.

Two things stand out. Individuals account for roughly three out of every four dollars deferred, so this is not mainly a big-corporation tool. And the yearly total sits near $11 billion and stays there. The JCT projects it holding above $10.5 billion a year through 2029.

One caveat we will state plainly: the JCT revised this line upward between reports. Its 2022 vintage estimated the 2024 deferral at about $6.1 billion; its 2024 report put the same year near $10.9 billion, after updated data on real estate gains. So we anchor on the current estimates rather than drawing a trend line across report years, which would overstate the growth.

Dataset two: what commercial property actually sold for

For prices we used the Green Street Commercial Property Price Index, a monthly measure of unleveraged U.S. commercial values built from deals being negotiated and contracted, not appraisals that lag the market. Green Street marks the cycle peak at March 2022, right before the Federal Reserve started raising rates.

The pattern is a sharp repricing in 2022 and 2023 as borrowing costs jumped, then a slow recovery starting in 2024. The Freddie Mac 30-year fixed mortgage rate frames the shock: it hit a record low of 2.65% in the first week of January 2021, then climbed above 7% by October 2023, the highest in more than two decades. Financing more than doubled in cost, and property values took the hit.

How we combined them, and what the units mean

These two series do not share a unit. One is dollars of deferred tax; the other is a price index. We are not dividing one by the other or inventing a ratio. We are comparing direction and size over the same window: prices down about 20% from peak, deferral flat near $11 billion. The value here is in the divergence, and the divergence has a clear cause.

The JCT figure is an estimate of forgone revenue, which stands in for the scale of deferral rather than counting individual transactions. We treat it that way throughout.

Why the deferral held while prices fell

The tax deferred in a 1031 exchange is tax on the gain an investor has already built up. Much of that gain was banked during the 2020 and 2021 run-up, when values climbed fast. A 20% dip from a 2022 peak does not erase gains accumulated over a decade of ownership. So the pool of embedded gain that 1031 defers stayed large even as this quarter’s prices softened.

The higher-rate market pushed in the same direction. An investor sitting on a low-basis property bought years ago faces a real choice: sell now, pay capital gains and depreciation-recapture tax, and buy the next property with 7% debt — or use a 1031 like-kind exchange to move the full proceeds into a new property and keep the tax deferred. When financing is expensive and prices are recovering, keeping every dollar of equity working matters more, not less. That is the behavior a flat deferral in a down market points to: exchangers kept deferring rather than realizing gains locked in at 2021 highs.

What this means if you own investment property

• The tax benefit does not track the price cycle. Your embedded gain (and the tax you would owe on a straight sale) reflects years of appreciation, not the last few quarters. A softer market does not shrink the reason to consider an exchange.
• A recovering market rewards staying invested. Green Street’s index turned positive in 2024 and kept gaining into 2025. Selling out and paying the tax means reinvesting a smaller balance into that recovery. A 1031 keeps the full amount in play.
• Rate math cuts toward deferral. With 30-year financing above where it sat in 2021, the equity you preserve by deferring tax offsets part of a bigger, costlier loan on the replacement property.
• The clock is the risk, not the market. A 1031 exchange runs on strict deadlines: 45 days to identify a replacement property and 180 days to close. A qualified intermediary has to hold the proceeds from the moment your sale closes. Line that up before you sell, not after.

None of this is tax advice for your specific situation. It is a read of two public datasets that happen to point the same way. If you are weighing a sale, talk with your CPA and a qualified intermediary about whether an exchange fits before you sign anything.

Sources and methodology

1031 deferral figures: Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2025–2029 (JCX-45-25) and Fiscal Years 2024–2028 (JCX-48-24), line “Deferral of gain on like-kind exchanges.” The 2022 vintage cited for context is JCX-22-22. Reports at jct.gov.

Commercial property prices: Green Street Commercial Property Price Index, all-property. Peak-to-date figures and sector detail via Green Street’s published index and reporting on it; the November 2025 reading is from Green Street’s December 4, 2025 press release, Green Street CPPI.

Financing rates: Freddie Mac Primary Mortgage Market Survey, 30-year fixed rate average, freddiemac.com/pmms.

Method: We compared the annual JCT deferral estimate (corporations plus individuals) against Green Street’s all-property index over the March 2022–November 2025 window. The two series use different units; we compare direction and magnitude, not a ratio. The JCT figure estimates forgone federal revenue and stands in for the scale of deferral, not a count of exchanges.

Reviewed by Michael Bergman, Universal Pacific 1031 Exchange. Universal Pacific provides qualified intermediary services nationwide and does not provide legal or tax advice; consult your own advisors.