Goodman Group adopts an integrated business model of owning, developing, and managing quality assets.

About Goodman Limited

Goodman Limited (Goodman, ASX: GMG) is an integrated global property group comprised of the stapled entities Goodman Limited, Goodman Industrial Trust and Goodman Logistics (HK) Limited. It is the largest industrial property group listed on the ASX.

Diversified earnings model reduces earnings risk 

Goodman’s active management operating model optimises returns by owning, developing, and managing customers’ property and logistics needs.

Reported earnings of a Real Estate Investment Trust with a development arm can be lumpy and less predictable than a pure rental model because the timing of completions and earnings recognition is uncertain. However, Goodman has scale of operations and specialist capabilities that provide a diversity of income streams from its customers’ service offering that includes owning, developing, and managing essential assets in supply constrained locations.

Goodman manages portfolio earnings risk by focusing on quality assets and blue-chip tenants. These high quality attributes enable a stable portfolio occupancy rate of 98 percent and a weighted-average lease expiry period of 5.1 years to be achieved.

Seventy-four percent of development activity is pre-sold 

Development activity Work-in-Progress at 31 March 2024 is $12.9 billion across 82 projects, with 74 percent of WIP currently pre-sold or being built for third parties. Significantly, Data Centres under construction currently represent 40 percent of WIP.

Goodman’s relatively strong risk-adjusted returns on development projects are enhanced by increasingly undertaking development projects that have been originated on Goodman’s balance sheet. Currently Goodman is achieving 7 percent yield on cost on project commencements and 6.8 percent on project WIP.

Data Centres to drive future earnings growth 

The digital economic revolution has meant a seismic change in consumer logistics, resulting in a shift from operating capital for labour to increasing demand for investment capital for technology infrastructure solutions. This transformation is largely driven by Artificial Intelligence (AI) usage, cloud computing, and cybersecurity risk, creating exponential demand for Data Centres. Goodman has identified this trend early before the herd and has firmly positioned itself ahead of competitors seeking to position themselves in this high-demand market. High demand is synonymous with high profit, and this is the position that Goodman finds itself in today.

Data centres currently represent 40 percent of Work-in-Progress.

Data centres require vast amounts of electricity to function. According to industry experts the energy demand from Data Centres and data transmission networks accounts for about 2 to 3 percent of global electricity use. A single Data Centre comprises rows and racks of powerful computers that can consume the equivalent energy consumption of 50,000 homes. Importantly, Data Centres must be in areas where electricity supply is 100 percent reliable. These areas often service hospitals with critical and life-saving devices, and provide power to essential telecommunications, water supply and sewerage infrastructure. This places a key focus on securing suitable sites serviced by a reliable electricity supply, creating scarcity of suitable Data Centre locations. However, Goodman’s strategic foresight has placed it in a commanding position to secure well-positioned sites to supply new, high-value, high-tier Data Centre facilities in supply constrained locations.

The future  

Future demand for essential infrastructure needed for the expanding digital economy is likely to support long-term and consistent earnings growth for Goodman Group. Goodman has an established pipeline of strategically located properties that enhance user productivity by improving supply chain efficiency using automation and by offering faster transit times for the movement of goods. The Group also has the development expertise and an expanding global power bank to address growing Data Centre demand as AI and cloud computing expands.

These irreversible trends should support long-term earnings and distribution growth for Goodman Group unitholders.