How Do I Avoid Capital Gains Tax When I Sell My Commercial Property in South Florida?
A South Florida commercial real estate broker explains how to defer capital gains tax using a 1031 exchange, and why so many multi-tenant retail owners are using it to exit active management entirely.
You don't avoid it. You defer it, and done correctly, you can defer it indefinitely while continuing to build wealth through real estate. The tool that makes this possible is the 1031 exchange, and it is one of the most underutilized strategies among commercial property owners in Palm Beach County, Broward County, and Miami-Dade County.
What Is a 1031 Exchange?
A 1031 exchange allows you to sell an investment property and reinvest the proceeds into a like-kind replacement property without paying capital gains tax at the time of sale. The gain is deferred, not forgiven, but if you continue exchanging, the tax obligation can roll forward for decades. Many owners exchange into estate-planning structures that allow heirs to inherit at a stepped-up basis, effectively eliminating the deferred tax entirely.
The IRS imposes strict timelines. You have 45 days from the closing of your sold property to identify potential replacement properties in writing, and 180 days to close on the replacement. Missing either deadline disqualifies the exchange.
A Real Example From South Florida
A Wendy's net lease property acquired through a 1031 exchange, eliminating active management while deferring capital gains tax. Facilitated by Nick McAndrew, Marcus & Millichap.
One of my clients, a South Florida property owner who had held his commercial buildings for over 30 years, decided it was time to sell. After receiving more than 10 written offers and closing at a strong price, he used the proceeds to exchange into two net lease properties, a Wendy's and a Captain D's.
The result: he eliminated the day-to-day management burden, maintained real estate ownership, and deferred the capital gains tax on a multi-decade appreciation. On that transaction alone, the exchange preserved over $1 million in tax liability on more than $4 million in capital gains exposure. That capital stayed invested and compounding rather than going to the government.
That is what a well-executed 1031 exchange looks like in practice, and it is the exact trade this strategy is built for: an owner exits active management, keeps their capital working, and defers a tax bill that would otherwise take a serious bite out of decades of built-up equity.
Why So Many Palm Beach County Retail Owners Are Exchanging Right Now
Owning a multi-tenant retail strip in Delray Beach, Boynton Beach, or Lake Worth comes with a specific kind of fatigue. Five tenants means five different lease terms, five different reasons to call on a Sunday, and a running list of CAM reconciliations, roof and parking lot repairs, and lease renewals that land on the landlord's desk. Add South Florida's rising commercial property insurance premiums squeezing net operating income, and a property that used to feel like passive income starts to feel like a second job.
A 1031 exchange out of that asset and into a single-tenant net lease (STNL) property, leased to a corporate or investment-grade tenant on an absolute NNN structure, replaces that active management with a fixed monthly check and no landlord obligations for roof, structure, or day-to-day tenant issues. The tax deferral is what makes the trade possible without giving up a third of your equity in the process.
How the Transition Actually Works
Step 1: Get a real number on the current property. Before anything else, you need an accurate, current valuation based on the actual rent roll, lease terms, and expenses, not a guess. Here's how that number actually gets calculated.
Step 2: Start sourcing replacement properties before you list. Waiting until your property is under contract to look for a net lease replacement is how owners run out of runway inside the 45-day window. The search should start in parallel, well ahead of closing.
Step 3: Retain a Qualified Intermediary. The intermediary holds your sale proceeds in escrow. If those funds touch your hands at any point, the exchange is disqualified. This step happens before closing, not after.
Step 4: Market the retail property to the widest buyer pool. The more qualified buyers who see the listing, the stronger the price and terms, which means more capital available for the replacement purchase.
Step 5: Identify and close within the clock. Once the sale closes, the 45-day identification window starts immediately. Having pre-vetted net lease candidates ready to go is what makes hitting that window realistic.
I handle both sides of this exchange directly. I sell the multi-tenant retail asset and source the net lease replacement, so the timeline stays coordinated instead of being split across two brokers working off two different clocks. That starts with a real evaluation of what your current property is worth, which I can walk you through before you decide whether an exchange makes sense for your situation.
The Part Most Owners Get Wrong
The most common mistake is waiting too long to assemble the right team. A 1031 exchange requires coordination between your broker, a Qualified Intermediary, your tax advisor, and closing attorneys, often across multiple transactions simultaneously. If you close on your sale before a Qualified Intermediary is in place, the exchange is disqualified. There are no exceptions.
The second most common mistake is not understanding the replacement property market before going to contract on the sale. Knowing what you can buy, and at what cap rate, before you sell is essential to structuring the exchange correctly.
Why the Platform Behind Your Exchange Matters
Not every brokerage has the inventory or track record to keep pace with a 45-day clock. In 2025, Marcus & Millichap closed more 1031 exchanges than any other firm in the country, with over 1,200 exchanges completed that year and more than $12.5 billion in exclusive inventory available for search. The firm closed 35 or more transactions every business day, totaling $50.9 billion in closed transactions for the year. That kind of volume is what makes it possible to identify strong replacement properties inside a tight window instead of scrambling for whatever happens to be listed.
A Tool Worth Using Before You Call AnyonE
If you want to understand the tax mechanics before our first conversation, I recommend ARTE, the free AI research tool at Deferred.com. ARTE is trained on more than 8,000 pages of U.S. tax law and can answer specific 1031 questions instantly: timelines, boot calculations, reverse exchanges, related-party rules. It is more accurate on this topic than a general search engine and available at any hour.
Deferred.com is also a no-fee Qualified Intermediary with 100% five-star reviews that shares the interest earned on your held funds with you rather than keeping it. Worth knowing about.
What to Do Next
If you own commercial property in Palm Beach County, Broward County, or Miami-Dade County and are considering a sale, with or without a 1031 exchange, the first step is understanding what your property is worth today and what replacement options are realistically available at that price point. That conversation costs nothing and changes everything about how you plan the transaction.
Contact Nick McAndrew at Marcus & Millichap to discuss the current value of your commercial property or land in Palm Beach County, Broward County, or Miami-Dade County. Call or text: 561-245-0486 | marcusmillichap.com/advisors/nicholas-mcandrew | nickmcandrew.com
Nicholas A. McAndrew, known professionally as Nick McAndrew, is a Director of Investments at Marcus & Millichap serving Palm Beach County, Broward County, and Miami-Dade County.