Macroeconomic uncertainty and geopolitical instability continue to challenge the Zacks Real Estate – Development industry, likely increasing material costs and keeping real estate prices elevated. Sales activity is expected to stay subdued in the near future until there is a recovery in macroeconomic conditions.

However, healthy demand across certain real estate property categories, along with a slowdown in the pace of new deliveries, is anticipated to support the industry, thereby placing companies like Forestar Group, Inc. (FOR Quick QuoteFOR - Free Report) and Sky Harbour Group Corporation (SKYH Quick QuoteSKYH - Free Report) well 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 them 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: Macroeconomic uncertainty in the United States remains elevated. Tariff adjustments and ongoing trade negotiations are raising the cost of imported goods and raw materials, increasing margin pressure across affecting sectors and fueling investor skepticism about near-term economic growth. Companies dependent on complex international supply chains and global workforces now face a broader set of operational and compliance risks, stemming not only from shifting trade rules but also from tighter immigration policies and changing diplomatic relations. Against this backdrop, clients are likely to adopt a more conservative stance, while investors’ desire for greater price discovery is expected to prolong transaction timelines.

Geopolitical Instability to Affect the Industry: Geopolitical instability is expected to weigh on industry performance. Ongoing conflicts in the Middle East and between Russia and Ukraine have disrupted the global trade flows, affected commodity prices and intensified supply-chain bottlenecks, particularly in energy, semiconductors and agriculture. These disruptions have added to inflationary pressures, complicating the Federal Reserve’s efforts to bring inflation under control without slowing growth. In addition, tighter underwriting by several capital sources is reducing credit availability. As a result, businesses are likely to delay investments and consumers curb major purchases, which could dampen overall industrial output in the near term until geopolitical tensions ease and macroeconomic confidence improves.

Demand Revival for Certain Asset Classes and Constrained Supply Helps Industry Fundamentals: Demand for certain real estate categories, such as industrial, logistics, data center and office, is witnessing healthy growth. 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. Office REITs are witnessing 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 homes, reflecting more than a decade of under-building relative to household formation and population growth. The retail real estate market is also going through supply shortages, which are 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 #214, which places it in the bottom 12% 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 2026, the industry’s earnings estimates have moved 12% downward since May 2025.

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 broader Finance sector and the S&P 500 composite over the past year.

The industry has gained 10.1% during this period compared with the S&P 500 composite’s growth of 30.3%. The broader Finance sector has increased 11%.

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 14.37X compared with the S&P 500’s 21.85X. The industry is also trading below the Finance sector’s forward 12-month P/E of 15.57X. 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 62.92X and as low as 5.80X, with a median of 12.55X.

2 Real Estate Development Stocks to Consider

Sky Harbour Group Corporation: This White Plains, NY-based company operates as an aviation infrastructure developer. It is building a nationwide network of Home-Basing Solutions/ Home Base Operator campuses for business and general aviation aircraft across the United States. The company develops, leases and manages modern general aviation hangars and campus facilities that offer private hangars, dedicated tenant suites and services tailored for home based aircraft.

Sky Harbour targets airports with hangar shortages and significant aircraft populations, often near metropolitan areas. It intends to capitalize on the existing hangar supply constraints, particularly for high-end tenants. As of the end of first-quarter 2026, the company operated 1.03 million square feet of hangar and associated office and support space, with approximately 2 million square feet of aviation ramp and vehicle parking.

It reported strong first-quarter 2026 results, with consolidated revenues rising 56% year over year and 8% sequentially, backed by the new campus openings during the past year and increases in occupancy and rental rates.

SKYH currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2026 EPS was revised to negative 66 cents compared to negative 96 cents over the past two months. The company’s shares have gained 2.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Forestar Group Inc.: This is a majority-owned subsidiary of D.R. Horton and operates as a pure-play residential lot development company. It focuses on acquiring entitled land and developing it into finished single-family residential lots, which are then sold to local, regional and national homebuilders.

The company is likely to benefit from the strong demand for residential lots in the more affordable-priced single-family home segments, where the supply of new and existing homes remains constrained. With a low net leverage ratio and a strong liquidity position, FOR remains well-poised to navigate any macro challenges and bank on growth scopes in its land pipelines.

In the second quarter of 2026, the company reported consolidated revenues of $374.3 million, rising 7% year over year. The company’s owned lot position of 24,100 lots or 38%, was under contract to be sold, representing approximately $2.2 billion of future revenue.

FOR currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 EPS remained unchanged at $3.06 over the past three months. The stock has gained 6.1% in the past six months.