3 Real Estate Operations Stocks Poised to Escape Industry Woes
The real estate operations industry consists of companies that offer various services such as leasing, property management, investment management, valuation, and more. However, real estate investment trusts or REITs are not part of this sector. The performance of the industry is significantly influenced by economic trends and government policies, which affect both global and regional markets. Key factors like economic activity, employment growth, interest-rate levels, and the geopolitical climate play crucial roles in shaping the fate of the real estate market.
What’s Shaping the Real Estate Operations Industry’s Future?
Geopolitical unrest and macroeconomic challenges are key factors likely to impact the industry’s future performance. Conflicts such as the Russia-Ukraine war and the Israel-Hamas war contribute to regional instability and heavily influence global supply chains, raising inflation rates and creating additional economic challenges worldwide. This instability encourages clients to approach transactions cautiously, resulting in delays in closing timelines.
The demand for certain real estate categories has suffered due to the pandemic, which drastically altered the utilization of commercial real estate. Despite efforts promoting a return to office spaces, the transition remains slow, preventing tenants from making long-term commitments. Hotels, too, have faced growth challenges, with domestic leisure demand moderating and in-person interactions not yet reaching pre-pandemic levels.
Despite these challenges, outsourcing real estate needs remains a strong trend. Corporations, public sector entities, and other large organizations continue to rely on third-party expertise to enhance efficiency and execution. This shift is driving growth opportunities for real estate operation firms, which are expanding their client bases and optimizing technological investments to support market share growth.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Real Estate Operations industry is part of the broader Zacks Finance sector and currently holds a low rank, reflecting bleak near-term prospects. This is due to the declining earnings per share outlook for companies within the sector. Recent earnings estimates for 2024 and 2025 have decreased noticeably, indicating waning analyst confidence in the industry’s growth potential.
Industry Performance and Valuation
Over the past year, the real estate operations industry has outperformed the Zacks Finance sector but has fallen short of matching the growth seen in the S&P 500. In terms of valuation, the industry trades at a forward 12-month price-to-earnings ratio higher than the broader Finance sector but lower than the S&P 500. Historically, it has experienced wide fluctuations in this metric.
3 Real Estate Operation Stocks Trying to Survive the Industry Challenges
Despite the challenges facing the industry, certain stocks are showing resilience and are positioned to emerge stronger:
CBRE Group
Based in Dallas, TX, CBRE Group is a leading commercial real estate services and investment firm. It offers a comprehensive range of services, catering to tenants, owners, and investors globally. CBRE’s diversification efforts and a robust outsourcing business pipeline position it for growth, complemented by strategic acquisitions and technology investments. The company’s recent moves have bolstered its performance, with shares rising notably over the past quarter.
Jones Lang LaSalle Incorporated
Jones Lang LaSalle, or JLL, is a Chicago-based full-service real estate firm offering corporate, financial, and investment management services. Its diverse array of products and continued strategic investments have fortified its standing in the market. The company’s data-driven platforms increase client engagement, backed by favorable outsourcing trends. JLL’s shares have seen appreciable growth recently, indicating strengthened investor confidence.
Kennedy Wilson
Located in Beverly Hills, CA, Kennedy Wilson is a global real estate investment company focused on high-growth regions within the United States, the U.K., and Ireland. It benefits from a flourishing investment management business and strong demand for its high-quality real estate portfolio. This robust demand has contributed to the company’s recent positive performance in the stock market.
The future of the real estate operations industry is being reshaped by complex geopolitical and macroeconomic landscapes. However, strategic outsourcing and investment in technology present opportunities for industry leaders to navigate these challenges successfully. Companies like CBRE Group, Jones Lang LaSalle, and Kennedy Wilson exemplify resilience and potential growth in an ever-evolving market.
