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2 Top Growth Stocks in the Real Estate Sector

Amid the low-interest-rate environment and the home-buying spree, the real estate sector is expected to continue seeing an upswing in demand. Therefore, we think it may be profitable to invest in prominent real estate industry players CBRE Group (CBRE) and Jones Lang LaSalle (JLL) owing to their solid growth attributes. Read on.

The housing market in the United States remained robust in July, with previously owned house sales increasing quicker than the previous month as high prices motivated  owners to list more properties. According to the National Association of Realtors, sales went up 2% in July versus the prior month. In addition, sales increased 1.5% in July compared to the same period last year.

A low-interest-rate environment and the desire to relocate to bigger and better locations have fostered  high demand in the real estate sector over the past year. The global real estate market is expected to reach $3717.03 billion by 2025, growing at an 8% CAGR.

Investors’ interest in growth stocks is evident in the S&P SPDR 500 Growth ETF’s (SPYG) 21.5% return so far this year. Hence, as investors remain focused on growth stocks that can offer substantial returns this year and beyond, major real estate players CBRE Group Inc. (CBRE) and Jones Lang LaSalle Incorporated (JLL), with solid growth potential, could be wise bets now.

CBRE Group Inc. (CBRE)

CBRE is a global provider of commercial real estate services and investments that is based in Los Angeles. Advisory Services; Global Workplace Solutions; and Real Estate Investments are the company’s three operational segments. In addition, it develops residential-led and mixed-use sites in London under the Telford Homes brand.

Last month, Duke Realty Corporation, the largest domestic-only logistics REIT, and CBRE formed a joint venture. CBRE Global Investors will hold 80% of the venture, while Duke Realty will control 20%. The venture intends to finance assets with secured debt at a 50-60% loan-to-value ratio.

Also, last month, CBRE agreed to acquire a 60% ownership stake in Turner and Townsend Holdings Limited, a United Kingdom-based global leader in program, project, and cost management. Through this acquisition , CBRE seeks to expand its growth opportunities in project management.

For the second quarter ended June 30, 2021, CBRE's revenue increased 20% from its year-ago value to $6.46 billion. The company’s operating income increased 289.2% year-over-year to $366.48 million over this period. Its net income increased 440.5% year-over-year to $442.64 million, while its EPS grew  441.7% from the prior-year quarter to $1.30. Its revenue increased at a 14.9% CAGR  over the past five years, and its levered free cash flow increased at an 84.8% annualized rate over the past three years.

The company's EPS is expected to grow 46.8% year-over-year to $4.8 in the current year. In addition, analysts expect CBRE's revenue to increase 11.8% in its fiscal year 2021. CBRE's stock has gained 97.6% over the past year and 48.1% year-to-date.

CBRE's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CBRE is also rated an A for Growth, and a B for Sentiment and Momentum. Within the Real Estate Services industry, it is ranked #5 of 46 stocks.

To see additional POWR Ratings for Stability, Quality, and Value for CBRE, click here.

Jones Lang LaSalle Incorporated (JLL)

Chicago-based JLL is a professional services company that specializes in real estate and investment management in the United States, Europe, the Middle East, Africa, and the Asia Pacific. The company provides various real estate services, including agency leasing and tenant representation, capital market services, merger and acquisition, corporate advisory, and investment sales and acquisitions services.

This month, JLL's Capital Markets group announced the sale of a 12-property office portfolio that totals 2.3 million square feet in the Washington, D.C. metropolitan region for $766 million.

Also this month, JLL agreed to purchase Skyline AI, a leading artificial intelligence (AI) technology company that is revolutionizing commercial real estate (CRE) by employing unique machine learning algorithms. This acquisition will enable JLL to establish a stronger market presence by leveraging Skyline AI’s innovative technology.

During the second quarter, ended June 30, 2021, JLL’s sales increased 22.5% year-over-year to $4.50 billion. Its operating income grew significantly from the year-ago value to $224.3 million. The company's net income increased substantially year-over-year to $200 million. In addition, its adjusted EBITDA increased 222% year-over-year to $332.4 million over this period. Its net income and EBITDA grew at CAGRs of 28.5% and 14%, respectively, over the past three years.

The company’s EPS is expected to grow 66.7% year-over-year to $15.77 in its fiscal year 2021. Analysts expect JLL’s revenue to increase 20.4% year-over-year to $7.38 billion in the current year. The stock has gained 136% in price over the past year and 61.7% so far this year.

JLL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. JLL also has an A grade for Growth and a B for Momentum. The stock is ranked #3 of 46 stocks in the Real Estate Services industry.

Beyond the POWR Ratings grades we have just highlighted, you can see the JLL ratings for Sentiment, Stability, Value, and Quality.


CBRE shares were trading at $94.62 per share on Wednesday afternoon, up $1.73 (+1.86%). Year-to-date, CBRE has gained 50.86%, versus a 20.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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