Buying Is The New Building: Why Multifamily Developers Are Shifting To Acquisition Mode

Some of the mid-Atlantic's largest developers are putting away their shovels and taking out their checkbooks. 

Because acquiring apartments is cheaper than developing ground up, investors and developers — even those whose bread-and-butter has been ground-up development — are going all-in on buying existing apartments.

“I have a voracious appetite to buy new buildings,” Bozzuto Group CEO Toby Bozzuto said Tuesday at Bisnow’s Multifamily Annual Conference East, held at the Bethesda North Marriott Hotel & Conference Center. 

Due to the difficulties of starting development, the Greenbelt, Maryland-based company made a recent move to ramp up its acquisition pipeline. It partnered with Invesco to raise a $330M fund that allows the partnership to invest in $1B of real estate.

The fund, which closed earlier this year, is acquiring apartments built after 2000, Bozzuto said. It has already spent a quarter of a billion dollars for two assets, including one near Dulles International Airport: the 454-unit Ashton at Dulles Corner for $147M. 

“I would love a fund two — that’s my goal,” Bozzuto said. 

His company isn't alone. Half a dozen development and investment executives on Bisnow’s stage said they’re making this shift toward buying apartment buildings, often with a focus on improving them.

“We really shifted our focus from development to acquiring existing product in this environment,” Shoreham Capital founder and managing partner Doug Faron said. “And the math is simple.” 

He said that while developers are now doing ground-up multifamily with cap rates hovering around 6.5%, acquisitions are coming in with cap rates in the range of 5.75% to 6.25%.

Buying apartment buildings today is a strategic advantage, panelists said, both because it’s the more economic alternative to gain volume and because a supply shortage is looming. 

The lack of new development in the pipeline means that if owners can scoop up existing assets now, they’ll be holding some valuable cards over the next few years as the supply-and-demand imbalance gets tighter.

“We’ll buy everything we can in ’26,” Jefferson Apartment Group President Jim Butz said. 

He said if investors can “swallow hard” and buy assets at or below replacement cost now and next year, and get any projects possible off the ground, they'll be in good shape by the end of the decade. 

“Then, we're going to be partying in '29, but we have to persevere through the next 12 months,” Butz said.

As of the end of September, multifamily construction starts in the U.S. were down by 47.4% year-over-year, according to Avison Young. 

“We had our peak year in ’22 at almost $1B in production,” Butz said. “And, you know, in a good year, this year, if we did $250M, we'd be excited, and that's true of most of our peers across the country.” 

Multifamily executives at the event spoke about hurdles facing the ground-up landscape, including tariffs, labor shortages, insurance costs and interest rates.

“We’re kind of in a death by a thousand cuts right now, and something’s gotta give,” Akridge Vice President of Development Kristin Connall said. 

Meanwhile, multifamily sales volume at the end of Q3 reached its highest level since 2022, the Avison Young report said, with the first three quarters of the year seeing a 3.6% increase from the same period in 2024. And it noted that 60% of dry powder in the country is targeting multifamily assets.

“We're doing more existing multifamily acquisitions than we ever had done before,” Menkiti Group President of Development, Asset Management and Capital Caroline Kenney said.

The D.C.-based developer is in its first year of deployments for Obsidian Catalyst I, a fund targeting $100M in acquisitions, with a focus on value-add buys. 

Through the fund, the developer partners with local co-sponsors in a range of geographies. The fund has already made five investments, Kenney said.

“We're still engaged in new construction and adaptive reuse deals, but it's a way to put our team's experience to work in the space,” she said. 

For Menkiti, the pivot didn’t come without a learning curve for a team that’s historically been development-forward. 

“There’s days it’s been great and days it’s been really, really painful,” Kenney said.

Connall said Akridge has also been delving into value-add acquisitions, a shift from its historical role as a ground-up developer. 

Akridge is known for developing D.C. trophy behemoths, including the Gallery Place condo and retail complex next to Capital One Arena and the grand Homer Building at Metro Center. This past winter, the developer delivered more than 1,100 multifamily units across three buildings in D.C.’s burgeoning Buzzard Point Neighborhood.

But now, Connall said the firm is looking at investments that are “prime for rent increases through light rehab and are close to demand drivers” — like military bases.

“It’s a deviation from what we’ve done in the past, but it’s contributing to the housing supply, it’s improving people’s quality of life and providing returns,” she said.