Delaware Statutory Trusts (DSTs) are playing a growing role in tax-deferred real estate strategies.. While DSTs have long been used in 1031 exchanges, market forces are shaping new dynamics that are influencing how advisors and investors evaluate these structures.
Understanding these trends can help financial professionals guide clients and assess whether DSTs align with evolving client goals, risk tolerance, and broader economic conditions.
Rising Interest Amid Aging Property Owners
Baby Boomers currently control a significant portion of U.S. investment real estate. As they approach or enter retirement, some property owners may look for ways to reduce the responsibilities associated with active real estate management. As a result, DSTs are increasingly being considered by property owners aiming to defer capital gains taxes while converting into professionally managed real estate with the potential to generate income.
This demographic shift may continue in the years ahead, contributing to growing interest in DSTs among clients moving from active to passive investment strategies.
Diversification Beyond Traditional Asset Classes
While early DSTs focused heavily on multifamily or retail properties, the market has evolved to include a broader mix of asset types. Advisors can now help clients access DSTs holding medical offices, industrial warehousing, self-storage, and even essential retail or senior living facilities.
This increased sector diversity provides valuable opportunities for advisors to customize DST portfolios around client preferences, income needs, or risk management priorities.
Sensitivity to Interest Rate Movements
Rising interest rates may affect DST properties' valuation and investor return expectations. Higher borrowing costs may reduce the acquisition volume of new DST offerings or lower income yields—particularly for offerings with higher loan-to-value (LTV) ratios.
Advisors may want to consider DSTs with conservative debt structures and greater transparency regarding interest rate exposure. Additionally, encouraging diversification across DSTs with different lease types and property classes can provide a buffer against rate-driven volatility.
Growing Regulatory and Sponsor Oversight
Regulators and due diligence firms are paying closer attention to sponsor disclosures, investment structures, and investor suitability. Advisors must stay informed on sponsor reputations, track records, and compliance processes.
Partnering with due diligence platforms or conducting independent sponsor evaluations is increasingly viewed as a best practice, particularly when comparing offering quality across the expanding marketplace.
Integration with Broader Wealth Strategies
Some advisors are integrating DSTs into long-term financial planning, not just as potential tax-deferral vehicles but as retirement income tools and estate planning components. DSTs may help generate passive income, reduce estate complexity, and prepare assets to transfer to heirs.
Some advisors are exploring ways to incorporate DSTs into broader investment property wealth management (IPWM) approaches, rather than treating them solely as transactional tools.
Final Thoughts
The DST market—and the expectations placed on financial professionals—is evolving. Staying attuned to key trends—demographic shifts, asset class diversity, interest rate sensitivity, regulatory focus, and wealth integration can support informed client conversations and align strategies with long-term planning goals.
By remaining proactive, advisors can help clients navigate a changing real estate landscape while reinforcing their role within the broader wealth management framework.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Article written by: Story Amplify. Story Amplify is a marketing agency that offers services such as copywriting across industries, including financial services, real estate investment services, and miscellaneous small businesses.
https://www.census.gov/topics/population/aging.html
https://www.greenstreet.com/insights/CPPI
https://www.cfp.net/knowledge/financial-planning-topics/real-estate
https://www.nar.realtor/research-and-statistics
