Flush from Amazon’s selection of Arlington County, Virginia, for a new headquarters facility, three “titans” of the real estate scene in the Washington, D.C., metropolitan region took a moment to celebrate at the ULI Washington Trends Conference.

The rapid pace of change in the market was reflected by conference topics ranging from micromobility—i.e., scooters—to artificial intelligence, “proptech,” and even the real estate implications of the rapidly evolving legal cannabis industry.

To put all of this into perspective were John “Chip” Akridge III, founder and chairman of Akridge; Thomas “Tom” Bozzuto, chairman and cofounder of the Bozzuto Group; and Bryant Foulger, chairman of Foulger-Pratt. They spoke during a panel discussion moderated by Barbara Schaefer McDuffie, managing director at Baker Tilly.

None of the three panelists is native to the region, but all realized its promise early in their careers. Bozzuto, who grew up in Waterbury, Connecticut, returned from service in Vietnam in 1971 and was determined to “save cities” as an employee of the U.S. Department of Housing and Urban Development (HUD) in Baltimore. By the mid-1970s, he had transitioned to private-sector development; in 1988, he and three partners cofounded the Bozzuto Group, which has overseen the development and construction of more than 50,000 housing units.

Akridge, also a Vietnam veteran, was born in Knoxville, Tennessee, and came to Washington in 1972. He worked for the late Robert Gladstone, who founded Quadrangle Development Corporation in 1971 to help rebuild the city in the wake of the 1968 riots. “From Bob, I learned that Washington had experienced 3 percent growth each year since the 1950s, all due to the federal government,” Akridge noted. “But that growth stopped with the recession of 1971–72.” Akridge launched his own firm in 1974, focusing on office buildings.

Foulger’s father, the late Sidney Foulger, moved his family from Salt Lake City to Bethesda, Maryland, in 1960 so that he could work for his friend J.W. Marriott. The elder Foulger formed his own firm in 1963 and founded Foulger-Pratt in 1974 with sons Bryant and Clayton, as well as son-in-law Brent Pratt. This multigenerational business is now one of the region’s largest privately held commercial real estate firms.

All three have thrived through the decades by diversifying. “I don’t create the market; I respond to it,” explained Foulger. “We started by building office buildings in suburban Maryland. When they are full, they are fabulous, but when they lose tenants, not so much. So we moved into other sectors such as retail, became a commercial contractor, and even started a commercial cleaning company.”

Akridge followed a similar path. “From 1974 through the 1990s, we developed only office product, but the market became more competitive,” he recalled. “We diversified product types and geographically.”

“Our initial objective was to do what our prior employer had done, but do it better,” said Bozzuto. “This worked well for a while, but we soon had to make a choice: to be a garage developer or to diversify. We now complete half a billion dollars’ worth of apartment construction annually, half of it for other owners. And 85 percent of our 77,000-unit property management portfolio is for third parties.”

But even diversified portfolios in strong markets pose risks, the panelists agreed. Foulger-Pratt’s new 50-acre (20 ha) mixed-use Maryland development, Park Potomac, is yielding “the narrowest returns we have ever underwritten,” said Foulger. “We now face the threat of higher interest rates, higher construction costs, and flat rents.”

Underlying this challenge is a greater problem, Foulger went on. “The cost of housing and building is just too high relative to incomes. Incomes are not growing in real dollars, and building costs continue to escalate faster than inflation. Now people are spending up to 50 percent of their income on housing.

“Look at how the costs in so many sectors—such as technology and air travel—have come down over the years, except in our industry,” he continued. “Each building is hand-built; it has to be unique and special. We have to figure out how to create far better economies and efficiencies.”

Bozzuto also decried the high cost of housing and called on the federal government to do more. “We are building beautiful housing, but it’s at the top of the market,” he said. “Without subsidies, you can’t build for the vast majority of people who really need housing. The U.S. government has almost entirely abdicated responsibility for housing poor people for the last 25 years. I think we are due for a reaction that will move us in the other direction in the next five years.”