The Zacks Real Estate – Development industry faces ongoing challenges like macroeconomic uncertainty and geopolitical instability. These factors are likely to drive up material expenses and uphold high real estate prices. Sales activity is expected to stay subdued in the near future until there is a recovery in macroeconomic conditions.

However, healthy demand across several real estate property categories, along with a slowdown in the pace of new deliveries, is anticipated to support the industry, thereby placing companies like Howard Hughes Holdings Inc. (HHH Quick QuoteHHH - Free Report) and Sky Harbour Group Corporation (SKYH Quick QuoteSKYH - Free Report) in a strong position for growth.

About the Industry

The Zacks Real Estate – Development industry comprises companies primarily engaged in owning, developing and managing a variety of real estate properties, including commercial, residential and mixed-use parcels. While some developers undertake construction on their land holdings to eventually sell the properties to homebuilders, retaining the same for conducting operations is also a common practice. Some industry participants actively undertake strategic activities, such as infrastructure improvement, along with land planning and development, to boost economic growth, attract quality job creators and diversify the regions in which the firms operate. These firms provide real estate leasing, stewardship, underwriting, planning and entitlement services. Real estate development companies are chiefly classified as financial ones, not construction firms.

What's Shaping the Future of the Real Estate Development Industry?

Macroeconomic Uncertainty Woes Linger: Tariff-related issues are expected to weigh on the industry’s growth in the near term. Recent shifts in tariff polices and trade negotiations with other countries are likely to increase the cost of certain imported goods and raw materials. This heightened cost pressure contributes to investors’ skepticism regarding the broader economic outlook. Furthermore, companies that rely on complex international supply chains and employ diverse, global workforces face increasingly multifaceted challenges. These challenges stem not only from evolving trade agreements but also from tightening immigration policies and shifting diplomatic relations, which collectively introduce new compliance requirements and operational risks. Amid such issues, clients are likely to adopt a cautious approach. As a result, investors’ desire for greater price discovery will continue to cause a delay in the closing timeline for transactions.

Geopolitical Instability to Affect the Industry: Geopolitical instability is expected to influence the performance of the industry. Ongoing conflicts in regions such as Eastern Europe and the Middle East have disrupted the global trade flows, affected commodity prices and intensified supply-chain bottlenecks, particularly in critical sectors like energy, semiconductors, and agriculture. These disruptions have contributed to sustained inflationary pressures, challenging the Federal Reserve’s efforts to stabilize prices without jeopardizing growth. Additionally, several capital sources are tightening their underwriting practices, reducing credit availability. As a result, businesses are delaying investments and consumers are reducing major purchases, dampening overall industrial output. In the near term, sales activity is expected to remain subdued until geopolitical tensions ease and macroeconomic confidence resumes.

Demand Revival for Certain Asset Classes and Constrained Supply Helps Industry Fundamentals: Demand for certain real estate categories, such as retail, industrial, logistics, data center, and office, is witnessing healthy growth. The increase in consumers' preference for in-person shopping following the pandemic is driving demand for retail real estate in high-traffic areas, prompting retailers to expand to fulfill this demand. Meanwhile, the e-commerce boom and supply-chain strategy transformations are driving growth in the industrial and logistics real estate space. With growth in cloud computing, Internet of Things and Big Data, and an increasing number of companies opting for third-party IT infrastructure, data-center companies are experiencing a booming market. The office REITs are experiencing an increase in the number of tenants returning to offices or announcing plans to do so. This is likely to support office real estate market fundamentals. Moreover, the residential market is experiencing a significant shortage of new homes as a result of more than a decade of under-building in comparison to population growth. The retail real estate market is also going through supply shortages, which is helping the industry fundamentals. Hence, the rebound in demand for certain real estate categories and supply shortage are likely to play a role in maintaining favorable industry fundamentals.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Real Estate Development industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #173, which places it in the bottom 28% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the southbound earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. For 2025, the industry’s earnings estimates have moved 23.6% upward since December 2024. For 2026, the industry’s earnings estimates have moved 12.2% downward since December 2024.

However, before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry Underperforms the Sector and the S&P 500

The Zacks Real Estate – Development industry has underperformed the S&P 500 composite and the broader Finance sector over the past year.

The industry has gained 10.7% during this period compared with the S&P 500 composite’s growth of 16.4%. The broader Finance sector has increased by 17.8%.

One-Year Price Performance

 

Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E), which is a commonly used multiple for valuing real estate development companies, we see that the industry is currently trading at 13.95X compared with the S&P 500’s 22.9X. The industry is also trading below the Finance sector’s forward 12-month P/E of 17.22X. This is shown in the chart below.

Forward 12-Month Price-to-Earnings (P/E) Ratio

Over the past five years, the industry has traded as high as 58.66X and as low as 5.46X, with a median of 12.05X.

2 Real Estate Development Stocks to Consider

Howard Hughes Holdings, Inc.: This Woodlands, TX-based company is engaged in the ownership, management and development of commercial, residential and mixed-use real estate throughout the United States.

Its assets include a portfolio of master-planned community assets, buildings and equipment, land and developments. With its expertise in the real estate sector, the company is well-poised to bank on the favorable demand in the residential and commercial real estate markets.

In the third quarter of 2025, the company reported total revenues of $390.2 million, up 19% year over year. Master Planned Community earnings before taxes hit a record $205 million from selling 349 residential acres at $786,000 per acre on average. The company contracted $1.4 billion in future condo sales revenues, thereby reinforcing its long-term cash-flow outlook.

HHH currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 EPS remained unchanged at $1.71 over the past two months. The stock has gained 0.1% in the past month. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sky Harbour Group Corporation: This White Plains, NY-based company operates as an aviation infrastructure developer, constructing a nationwide network of Home-Basing Solutions (HBS) campuses for business aircraft across the United States. The company develops, leases and manages general aviation hangars featuring exclusive private spaces and dedicated services for home-based aircraft.

Sky Harbour targets airfields in high-growth markets with hangar shortages and strong aircraft populations, often near metropolitan areas. It intends to capitalize on the existing hangar supply constraints, particularly for high-end tenants.

The company generates revenue primarily through long-term hangar leases. These leases typically average 3.5 years in duration, with some campuses achieving high occupancy rates near 95%. It reported strong third-quarter 2025 results with consolidated revenues of $7.3 million, up 78.2% year over year. It expects four new airports by the end of 2025, reaching a total of 23 airports in operation or development.

SKYH currently has a Zacks Rank #3. The Zacks Consensus Estimate for its 2025 EPS was revised to negative 9 cents compared to negative 14 cents over the past two months. The company’s shares have gained 0.4% in the past month.