DST Investments Continue to Gain Appeal Among Real Estate Investors

Real estate investors navigating today’s evolving market are increasingly seeking simplicity, tax efficiency, and access to institutional-quality assets. In this environment, Delaware Statutory Trusts (DSTs) continue to gain appeal among investors who want passive exposure to commercial real estate without the operational demands of direct ownership.

While DSTs are not new, current market dynamics (including elevated interest rates, valuation resets, and a growing number of investors exiting actively managed properties) have renewed interest in this long-standing investment structure. 

As an advisor, understanding why DSTs are resonating now may help support more informed, strategic conversations with clients.

Why Investor Interest in DSTs Is Growing

DSTs allow multiple investors to acquire fractional interests in large commercial real estate assets while maintaining eligibility for tax deferral through Section 1031 exchanges. This is a popular maneuver, with recent industry analysis estimating that approximately $1 trillion in real estate transactions occur through 1031 exchanges annually.

Additionally, there are several structural and market-driven factors contributing to the growing relevance of DSTs today.

1. Investors Shift Away From Active Property Management

Many long-time real estate owners are reaching an inflection point. Managing properties, especially industrial, retail, or multifamily assets, can become more complex over time as tenants change, capital expenditures rise, and regulatory requirements increase.

DSTs offer an alternative for investors who want to remain invested in real estate but step back from day-to-day responsibilities. Because DSTs are professionally managed by sponsors, investors do not handle leasing, maintenance, financing, or operations. This passive structure has become increasingly appealing to investors seeking to reduce day-to-day involvement, including those transitioning away from active property management.

Overall, advisory and industry commentary commonly notes that investors who are tired of the hassles of property management, including leasing, maintenance, and tenant oversight, explore DSTs as a way to step back from active management while staying invested in commercial real estate.

2. Continued Use of 1031 Exchanges as a Planning Tool

Despite periodic policy discussions in Congress around limiting or eliminating 1031 exchanges, the strategy remains firmly in place. As a result, tax-aware investors continue to look for replacement-property options that meet strict identification and closing timelines.

DSTs are often used as replacement properties because they are pre-acquired, structured to meet IRS guidelines, and available in defined investment amounts. According to Kiplinger and other personal finance publications, DSTs are among the most commonly used solutions for investors who need to complete a 1031 exchange but do not want to identify or manage another property on their own.

As an advisor, DSTs are often evaluated by advisors when clients are facing the 45-day identification window or want to diversify proceeds across multiple properties rather than reinvesting into a single asset.

3. Demand for Institutional-Quality Commercial Assets

DST offerings typically focus on large, income-producing properties that would otherwise be accessible primarily to institutional investors. These often include industrial, logistics, manufacturing, multifamily, and other essential-use real estate.

According to research from JLL and CBRE, industrial and logistics assets, particularly those tied to manufacturing, distribution, and supply chain infrastructure, continue to benefit from long-term demand drivers such as reshoring, e-commerce, and inventory reconfiguration. DSTs allow investors to gain exposure to these property types in a fractional, passive format.

This institutional-quality access can be especially valuable for investors who previously owned smaller or more concentrated properties and want broader exposure without increasing operational complexity.

4. Portfolio Diversification in a Volatile Market

Publicly traded REITs offer liquidity and transparency, but their returns often correlate more closely with equity markets, particularly during periods of volatility. According to research commentary from Cohen & Steers, many investors note that listed REITs can exhibit equity-like characteristics, including more pronounced short-term volatility and drawdowns, even when underlying property fundamentals remain comparatively steady. 

This dynamic helps explain why advisors often supplement public REIT exposure with private or non-traded real estate solutions.

Private real estate, including DSTs, is typically valued less frequently and may exhibit lower short-term volatility, though this also means pricing is less transparent and liquidity is limited. For investors with long-term horizons, DSTs can serve as a complement to public REIT exposure rather than a replacement, helping diversify how real estate functions within a broader portfolio.

5. Predictable Income Structures

Many DSTs are structured around long-term leases, often triple-net (NNN), which shift property-level expenses such as taxes, insurance, and maintenance to the tenant. NNN lease structures are commonly used in DST offerings to support more predictable cash flow expectations, though distributions are never guaranteed.

For income-oriented investors, this structure can be appealing, particularly when compared to actively managed properties that require frequent leasing, renovations, or capital infusions.

Important Trade-Offs to Keep in Mind

While DSTs continue to gain in popularity, they are not suitable for every investor. Advisors should discuss these key considerations with clients:

• Illiquidity: DST interests are typically held for multiple years, with limited secondary markets.
• Fees and sponsor risk: Returns depend heavily on sponsor underwriting, asset management, and execution.
• Limited control: Investors are passive and cannot influence property-level decisions.
• Market risk: Like all real estate, DSTs are subject to economic conditions, tenant performance, and valuation changes.

Overall, DSTs work best when used intentionally, such as for part of a tax planning or portfolio transition strategy.

Why Advisors Are Central to the DST Conversation

DSTs sit at the intersection of real estate, tax planning, and portfolio construction. Advisors play a critical role in helping clients:

• Evaluate whether DSTs align with their income, liquidity, and risk preferences.
• Coordinate with tax professionals on 1031 exchange compliance.
• Compare DSTs with other real estate and alternative investment options.
• Set realistic expectations around holding periods and outcomes.

As more investors seek simplified, tax-aware access to commercial real estate, DSTs continue to serve as a relevant tool — not because they eliminate risk, but because they offer structure, access, and flexibility in a complex market environment.

The Bottom Line

DST investments continue to gain appeal because they address several investor priorities at once: passive ownership, institutional-quality real estate, tax deferral potential, and diversification beyond public markets.

In today’s environment, the conversation is less about whether to invest in real estate and more about how. For investors stepping away from active management or repositioning capital, DSTs remain a structure worth understanding and, for some, incorporating thoughtfully into a broader strategy.

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.