A Real Estate Rebound: Signs of Selective Recovery in the Market

After several years of uncertainty in the commercial real estate (CRE) market due to rising interest rates, cost pressures, supply-chain disruptions, and macro-economic concerns, recent data points to signs of stabilization and selective recovery in parts of the commercial real estate market (Colliers, 2025).

Several factors are contributing to this rebound phase in the market. While tenant demand for industrial properties is down 10.9% year over year, according to the JLL U.S. Industrial Tenant Demand Study, demand for manufacturing is on the rise. The 3PL Logistics and Distribution industry also increased demand by 12.8% as logistics providers position themselves against supply chain disruptions. 

As certain market headwinds ease, investors may be reassessing how commercial real estate fits into a diversified portfolio. Let’s take a closer look at where we are in the CRE cycle to help you position client portfolios to take maximum advantage of the Delaware Statutory Trust (DST) structure. As the saying goes, timing is everything.

A Different Kind of Rebound

As highlighted by JLL’s U.S. Manufacturing Renaissance report, current tailwinds in the industrial real estate market can be attributed to:

• A shift from oversupply-driven sectors toward ones with structural demand, such as logistics, last-mile, and manufacturing hubs.
• Investors seeking hands-off exposure to real estate, preferring passive ownership instead of active landlord duties.
• Tax-sensitive real estate investors looking to reposition via a 1031 exchange or other replacement strategy.

If you think of the CRE rebound as a structural reset instead of a V-shaped spike, the implication is clear: some investors are viewing this period as a time to reassess strategies rather than remain on the sidelines.

Why Timing May Be on Your Side

When it comes to the industrial real estate market, there are three key dynamics aligning:

• Valuation adjustment is underway: Valuations have been repricing as cap rates and financing conditions shift. In several industrial submarkets, pricing has shown relative stability compared with other property types, even as yields adjust (Colliers, 2025; CRE Daily, 2025).
• Demand drivers remain intact: Longer-term demand drivers such as e-commerce growth, supply-chain reshoring and nearshoring, and the need for modern logistics and last-mile facilities, continue to underpin industrial demand (JLL, 2025; MDM, 2025). Data centers are also a growing segment of the industrial real estate market due to the surge in AI and cloud computing (CBRE, 2025).
• Tax-aware investors are ready to make a move: Property replacement is an attractive option for investors facing looming capital-gains exposure, as well as those who want to exit active management. Investors evaluating 1031 exchanges may find current valuations appealing, particularly if they seek income-producing, tax-deferred structures aligned with long-term goals.

What This Means for Your DST Strategy

For investors accustomed to direct property ownership (management, tenant relations, operational headaches), a DST can be a compelling alternative. DSTs provide access to institutional-quality assets, long-term triple net (NNN) leases, passive ownership, and tax-deferral advantages via 1031 exchanges. 

In the context of a CRE rebound, three DST-relevant points stand out:

• Entry during reset cycles: Investors entering the market during reset cycles may have exposure to potential appreciation over the hold period, though outcomes will depend on market conditions.
• Passive income on mission-critical assets: Private commercial real estate has historically provided diversification benefits and lower correlation with equities versus publicly-traded REITs, a pattern documented in a recent whitepaper from TIAA (though correlations can vary by timeframe and property type). 
• Replacement-property access for sellers: Owners looking to defer capital gains via a 1031 exchange may find DSTs particularly attractive when the timing lines up with broader market repositioning. 

Risks and Considerations You Should Keep Front of Mind

Of course, even favorable timing requires careful evaluation before jumping in. Key considerations to discuss with your clients include:

• Illiquidity: DSTs tend to require a multi-year hold. Investors must be comfortable with limited secondary market liquidity.
• Tenant and sector risk: Even industrial and logistics assets are not immune to tenant changes, lease expirations, or economic slowdowns. The sponsor’s underwriting of tenant credit, lease term, and market fundamentals is critical. 
• Sponsor selection and deal structure: Because investors in DSTs are passive, the choice of sponsor and the structure of the offering matter greatly.
• Valuation and timing risk: Even though valuations are adjusting, entering too early or in the wrong sub‐sector can hamper the advantages. A rebound is not guaranteed to deliver immediate outsized returns.
• Tax and exchange compliance: For investors using a 1031 exchange, the rules remain stringent, including a 45-day identification period, 180-day closing, “like-kind” replacement, and more.

A Framework for Action

Here’s a framework for helping your clients evaluate whether industrial manufacturing CRE aligns with their larger investment objectives.

1. Clarify your goal: Are you seeking capital appreciation upside, predictable income, portfolio diversification, estate planning simplicity, or tax deferral?
2. Assess your current exposure: Investors who own direct investment property should ask themselves whether they are comfortable continuing to manage properties and tenant risk. If not, a DST could be a better option.
3. Review market fundamentals: Is the sector or submarket positioned to benefit from secular tailwinds such as logistics and manufacturing? Are valuations attractive?
4. Evaluate the offering: For DSTs, dive into tenant creditworthiness, lease terms, property location, sponsor track record, fees, and exit strategy.
5. Check timing and tax implications: For 1031 investors, can the replacement process be coordinated within the required timeframe? Are you aligned with your tax advisor?
6. Comfort with your commitment: You have to be okay with the illiquidity, reduced control, and hold-period expectations that come with DSTs.

The Bottom Line

If real estate markets were poised to return to normal, many investors might wait on the sidelines. What we’re seeing is less of a return to the status quo and more of a transition to a new phase, one in which passive, institutional-quality real estate, long leases, and tax-efficient structures gain renewed relevance. In today’s market, timing isn’t about catching a peak but positioning your investors early in a reset.

For investors focused on industrial, logistics, or essential-use real estate, current conditions may warrant a closer look. As an advisor, you can help clients evaluate potential opportunities in CRE and determine whether DST structures align with their goals and risk tolerance.

Disclosure: The information provided herein is for educational purposes only and does not constitute an offer to buy or sell any security, nor should it be construed as investment, tax, or legal advice. Real estate and DST investments involve risk, including loss of principal, illiquidity, and market fluctuations. Past performance and market trends are not indicative of future results. Investors should consult their financial and tax professionals before making investment decisions.