Firms that facilitate real estate exchanges for smaller investors would also feel the pain. Louis Rogers, CEO of Capital Square 1031, a Glen Allen, Va.-based firm that handles more than $100 million worth of 1031 transactions annually, says, "The commercial real estate industry is at serious risk of being put into a tailspin or worse."
Rogers estimates that Section 1031 exchanges account for approximately 30% of the $400 billion to $500 billion annual real estate transaction volume. Eliminate the provision, he says, and billions of dollars of activity will "come to an immediate halt. … It is as simple as that." Many property owners, he warns, "will not sell on a taxable basis. They will hold forever."