Investors have a rare window to make high returns on 1031 exchanges, experts say.

Orders rose 30 percent year over year in January but plunged 30 percent in April and 50 percent in May, she said on a Marcus & Millichap webinar called Maximizing 1031 Exchanges. “2019 was an incredible year for IPX,” she said. “That gives me a lot of confidence — that we’re only down 18 percent.”

1031 exchange investors are motivated by a rare window of opportunity to make high returns, said Marcus & Millichap senior vice president and research services national director John Chang. That window exists because the cost of capital has decreased while capitalization rates have remained stable. “The 10-year Treasury has fallen significantly. It’s around 70 basis points right now, which is the lowest we’ve seen ever. Interest rates are dramatically lower than in the past, and that signals that the yield premium on the asset versus the cost of capital has opened back up and created another investment window.”

Many small investors are trading multifamily properties for triple-net-lease retail properties, said Marcus & Millichap senior vice president and retail division national director Scott Holmes. “When people go into net lease investments through a 1031 exchange, 47 percent of the time, they’re coming out of apartments; 12 percent are coming out of multitenant retail.”