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2 Real Estate Development Stocks to Consider as Fundamentals Rebound
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The Zacks Real Estate – Development industry constituents are poised to benefit from recovering demand across select real estate asset classes and constrained new supply, positioning players like Howard Hughes Holdings (HHH - Free Report) and Sky Harbour Group (SKYH - Free Report) for growth.
However, macroeconomic uncertainty and an uncertain interest rate trajectory are likely to weigh on the industry participants, potentially delaying development projects and investment decisions.
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?
Demand Revival for Certain Asset Classes Gives Scope for Growth: Demand across select U.S. real estate asset classes is strengthening, creating growth opportunities for developers. Industrial and logistics properties are witnessing improving demand, supported by e-commerce, supply-chain reconfiguration and manufacturing expansion. Data centers remain a major growth driver, fueled by artificial intelligence, cloud computing and hyperscale expansion. Office demand is showing signs of recovery, particularly for premium, well-located properties. The hospitality sector is also benefiting from improving travel demand. These trends support selective development opportunities, although elevated construction costs, financing constraints and uneven market conditions remain challenges.
Constrained Supply Helps Industry Fundamentals: Limited new construction continues to support fundamentals across the U.S. real estate development industry. The residential market faces structural supply constraints, with elevated financing costs, labor shortages and rising construction expenses restricting new developments. Moreover, the slowdown in housing starts and a shrinking multifamily construction pipeline are expected to ease competitive pressures and support the absorption of existing properties. These supply constraints should support occupancy and pricing power, particularly for well-located properties, while providing opportunities for developers to undertake selective, high-quality projects. Similarly, the aviation real estate segment is benefiting from a persistent shortage of hangar facilities, particularly those capable of accommodating larger business jets.
Macroeconomic Uncertainties Continue to Weigh on Growth: Macroeconomic uncertainty continues to weigh on the U.S. real estate development sector. Persistent inflationary pressures, geopolitical tensions and an uncertain interest rate trajectory are affecting development economics and investment confidence. The Federal Reserve's decision to maintain interest rates at 3.75-4% in October 2026, amid lingering inflation concerns, continues to constrain financing conditions. Meanwhile, the current political environment has added to concerns surrounding future economic policies and the investment outlook. These factors may prompt developers and investors to adopt a cautious approach toward new projects, potentially delaying investment decisions and transaction activity.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Real Estate - Development industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #32, which places it in the top 13% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates robust 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 top 50% of the Zacks-ranked industries results from the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential.
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 declined 27.3% during this period against the S&P 500 composite’s growth of 14.2%. The broader Finance sector has increased 10%.
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 19.42X compared with the S&P 500’s 18.83X. The industry is trading above the Finance sector’s forward 12-month P/E of 16.37X. 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 12.69X.
2 Real Estate Development Stocks to Consider
Howard Hughes Holdings: Headquartered in Woodlands, TX, the company is engaged in the ownership, management and development of commercial, residential and mixed-use real estate throughout the United States. The company benefits from strong performance across its master-planned communities (MPCs), supported by residential demand and land sales.
Its expansion into specialty insurance and reinsurance through the $2.1 billion acquisition of Vantage Group Holdings marks a strategic milestone. The transaction transforms HHH into a diversified holding company with two platforms.
In the third quarter of 2026, the company reported total revenues of $636.3 million, up 63.1% year over year, primarily driven by the inclusion of Vantage’s insurance operations. It sold 101 residential acres at an average price of $1.32 million per acre, up from $786,000 a year ago. Meanwhile, its condominium pipeline included $3.57 billion in future contracted revenues, with 62% of the 1,743 units under construction or in predevelopment already pre-sold or under contract, supporting long-term revenue visibility.
HHH sports a Zacks Rank #1 (Strong Buy) at present. The Zacks Consensus Estimate for 2026 EPS decreased 28 cents to $4.47 over the past month. However, it indicates a significant rise from the figure reported in the year-ago quarter. The company’s shares have rallied 22.8% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sky Harbour Group Corporation: Headquartered in White Plains, NY, the company is an aviation infrastructure company focused on building a nationwide network of Home-Basing Solutions (HBS) campuses for business aircraft. It develops, constructs, leases and manages general aviation hangars, offering dedicated aircraft storage, office space and related services.
It targets airports in major metropolitan and high-growth markets with significant business aircraft activity and strong hangar demand. As of the end of the second quarter of 2026, the company operated 1.04 million square feet of hangar and associated office and support space, with approximately 2 million square feet of aviation ramp and vehicle parking space.
The company delivered robust second-quarter 2026 results, with consolidated revenues rising 50% year over year and 13% sequentially. The rise was driven by the addition of new operating campuses over the past year, along with higher occupancy levels and increased rental rates.
SKYH currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 EPS was revised to negative 46 cents compared to negative 50 cents over the past three months. The company’s shares have gained 0.4% in the past six months.
View the Zacks #1 Rank List
Image: Bigstock
2 Real Estate Development Stocks to Consider as Fundamentals Rebound
The Zacks Real Estate – Development industry constituents are poised to benefit from recovering demand across select real estate asset classes and constrained new supply, positioning players like Howard Hughes Holdings (HHH - Free Report) and Sky Harbour Group (SKYH - Free Report) for growth.
However, macroeconomic uncertainty and an uncertain interest rate trajectory are likely to weigh on the industry participants, potentially delaying development projects and investment decisions.
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?
Demand Revival for Certain Asset Classes Gives Scope for Growth: Demand across select U.S. real estate asset classes is strengthening, creating growth opportunities for developers. Industrial and logistics properties are witnessing improving demand, supported by e-commerce, supply-chain reconfiguration and manufacturing expansion. Data centers remain a major growth driver, fueled by artificial intelligence, cloud computing and hyperscale expansion. Office demand is showing signs of recovery, particularly for premium, well-located properties. The hospitality sector is also benefiting from improving travel demand. These trends support selective development opportunities, although elevated construction costs, financing constraints and uneven market conditions remain challenges.
Constrained Supply Helps Industry Fundamentals: Limited new construction continues to support fundamentals across the U.S. real estate development industry. The residential market faces structural supply constraints, with elevated financing costs, labor shortages and rising construction expenses restricting new developments. Moreover, the slowdown in housing starts and a shrinking multifamily construction pipeline are expected to ease competitive pressures and support the absorption of existing properties. These supply constraints should support occupancy and pricing power, particularly for well-located properties, while providing opportunities for developers to undertake selective, high-quality projects. Similarly, the aviation real estate segment is benefiting from a persistent shortage of hangar facilities, particularly those capable of accommodating larger business jets.
Macroeconomic Uncertainties Continue to Weigh on Growth: Macroeconomic uncertainty continues to weigh on the U.S. real estate development sector. Persistent inflationary pressures, geopolitical tensions and an uncertain interest rate trajectory are affecting development economics and investment confidence. The Federal Reserve's decision to maintain interest rates at 3.75-4% in October 2026, amid lingering inflation concerns, continues to constrain financing conditions. Meanwhile, the current political environment has added to concerns surrounding future economic policies and the investment outlook. These factors may prompt developers and investors to adopt a cautious approach toward new projects, potentially delaying investment decisions and transaction activity.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Real Estate - Development industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #32, which places it in the top 13% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates robust 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 top 50% of the Zacks-ranked industries results from the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential.
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 declined 27.3% during this period against the S&P 500 composite’s growth of 14.2%. The broader Finance sector has increased 10%.
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 19.42X compared with the S&P 500’s 18.83X. The industry is trading above the Finance sector’s forward 12-month P/E of 16.37X. 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 12.69X.
2 Real Estate Development Stocks to Consider
Howard Hughes Holdings: Headquartered in Woodlands, TX, the company is engaged in the ownership, management and development of commercial, residential and mixed-use real estate throughout the United States. The company benefits from strong performance across its master-planned communities (MPCs), supported by residential demand and land sales.
Its expansion into specialty insurance and reinsurance through the $2.1 billion acquisition of Vantage Group Holdings marks a strategic milestone. The transaction transforms HHH into a diversified holding company with two platforms.
In the third quarter of 2026, the company reported total revenues of $636.3 million, up 63.1% year over year, primarily driven by the inclusion of Vantage’s insurance operations. It sold 101 residential acres at an average price of $1.32 million per acre, up from $786,000 a year ago. Meanwhile, its condominium pipeline included $3.57 billion in future contracted revenues, with 62% of the 1,743 units under construction or in predevelopment already pre-sold or under contract, supporting long-term revenue visibility.
HHH sports a Zacks Rank #1 (Strong Buy) at present. The Zacks Consensus Estimate for 2026 EPS decreased 28 cents to $4.47 over the past month. However, it indicates a significant rise from the figure reported in the year-ago quarter. The company’s shares have rallied 22.8% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sky Harbour Group Corporation: Headquartered in White Plains, NY, the company is an aviation infrastructure company focused on building a nationwide network of Home-Basing Solutions (HBS) campuses for business aircraft. It develops, constructs, leases and manages general aviation hangars, offering dedicated aircraft storage, office space and related services.
It targets airports in major metropolitan and high-growth markets with significant business aircraft activity and strong hangar demand. As of the end of the second quarter of 2026, the company operated 1.04 million square feet of hangar and associated office and support space, with approximately 2 million square feet of aviation ramp and vehicle parking space.
The company delivered robust second-quarter 2026 results, with consolidated revenues rising 50% year over year and 13% sequentially. The rise was driven by the addition of new operating campuses over the past year, along with higher occupancy levels and increased rental rates.
SKYH currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2026 EPS was revised to negative 46 cents compared to negative 50 cents over the past three months. The company’s shares have gained 0.4% in the past six months.