A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. In a world where developing new commercial real estate is difficult — from the cost of capital and materials to jurisdictional requirements, among other hurdles — a major developer is making a big bet that the old way is better. The Bozzuto Group is teaming up with Invesco in a billion-dollar venture to buy existing multifamily assets on the East Coast. The focus is on properties that have lost significant value but can be renovated and reconditioned to compete with newer, very desirable buildings. The strategy is to “capitalize on recovering market fundamentals” by focusing on assets that have the ability to gain value, Greg Kraus, managing director and head of U.S. transactions at Invesco Real Estate, said in a press release. The new fund is being launched amid oversupply in the market. Multifamily housing has seen a huge construction boom over the past five years, thanks to falling interest rates at the start of the pandemic and demographic factors. Much of this supply continues to flow through the pipeline, amid higher interest rates. Toby Bozzuto, CEO of Bozzuto Group, called this oversupply a “temporary phenomenon.” “Where supply is the problem now, supply is also the solution for the future when it comes to affordability,” he told Property Play. “So it’s a very interesting dynamic, because what we’re doing now is absorbing the excess units in the market. … The vacancies will dissipate in 2026 and, worst case, early ’27, but there’s nothing behind it.” Buying older buildings today can be done at prices lower than the cost of building from scratch, which Bozzuto has traditionally and always done. Existing buildings are often valued 10 to 20 percent below replacement costs. “Second, it’s quick to market. If you’re buying a building, you’re not dealing with the regulatory quagmire that, frankly, has exacerbated some of this problem, the supply problem,” Bozzuto said. Most experts expect the current oversupply situation to reverse within just a few years, given demographic demand and the simple fact that the for-sale housing market is very expensive, meaning more renters are waiting to become buyers. “A sharp decline in apartment starts raises hopes that the strong pipeline of deliveries will slow and ease some pressure on rentals in fast-growing markets,” according to a recent report from Yardi, which forecasts 450,000 units will be delivered in 2026, a decline from recent years. Still, the change “does not constitute a sufficient decline to push rents to robust levels,” he said. Despite lower rents and consumption, investors are increasingly interested in deploying capital in the multifamily sector. Berkadia’s 2026 Multifamily Investor Sentiment Survey, which surveyed 249 investors to gauge anticipated deal activity and opportunities within the sector, found that 87% of investors plan to moderately or aggressively expand their multifamily portfolios this year, “demonstrating cautious optimism despite ongoing challenges.” Some of these challenges relate to multifamily loans, where delinquencies are increasing and weighing on property valuations. Bozzuto, however, seems less worried. “I think the challenges will be relatively minimal, especially compared to some other asset classes,” he said. “There are some buildings where developers have really emphasized leverage or variable rate, and when they bring in a permanent loan – maybe it was a four- or five-year construction loan – when they go for a permanent loan, we can see some issues.” The distress, he said, will be short-lived and provide plenty of opportunity. “We’re going to go down the East Coast, maybe as far as Chicago, and buy multifamily assets that we can — ‘value-add,’ the idea being that either they’re undermanaged, or they haven’t been renovated, or there’s something that can be done better with those assets,” Bozzuto said. “And over time, rents will increase.” Ultimately, he said he hopes the fundamentals will evolve to allow new developments to succeed as well.