Goodman Group upgrades earnings as data wave takes off

The property company is going from running a global logistics empire to developing data centres to cater for the AI revolution.

Goodman Group boss Greg Goodman. Picture: John Feder/The Australian

Industrial property titan the Goodman Group has upgraded earnings as it rides a wave of new logistics developments and pushes more deeply in data centres around the world.

The $65bn company has flagged that it will keep pushing into the new sector where it can grow around the world, and it is switching some proposed industrial sites over to data centre projects.

Chief executive Greg Goodman said there was now a higher cost of capital and warned the economy was moderating as interest rates were remaining higher.

“We expect continued volatility in real estate markets globally, however the group and partnerships are well-placed and have strong balance sheets,” he said.

Goodman Group famously sold down assets ahead of the coronavirus crisis and has no drawn debt maturities until late 2025, with significant liquidity following it recent bank and bond market deals.

“We are well-placed to adapt to the macroeconomic environment, including the higher global cost of capital, allowing us to pursue opportunities for growth,” the chief executive said.

Goodman said that leasing transactions were showing resilience, including in cities like Sydney, but noted that China was weaker due to economic conditions in that market.

The group said it had delivered a strong operating performance for third quarter, positioning the business well for the full year and into 2025. It upgraded expected operating earnings per security growth for fiscal 2024 to 13 per cent.

“Our active asset management continues to optimise returns for our investors as we deliver essential infrastructure for the expanding digital economy,” Mr Goodman said.

The company said the top locations and quality of its properties allowed it to increase productivity, driving demand as logistics

customers are seeking to improve their supply chain efficiencies using automation and to offer customers faster transit times.

“We continue to develop large-scale, high value, data centres, and expand our global power bank to address growing data centre demand as AI usage and cloud computing expands,” he said. The group has large power banks in Europe and Japan.

Goodman also internalised the management of the NZ-listed Goodman Property Trust during the quarter and sold off a $780m portfolio of industrial assets to Barings and super fund REST in Australia.

“We continue to review our assets and capital allocation globally, and expect further recycling of capital over time,” Mr Goodman said.

Mr Goodman noted the increasingly high barriers to entry in data centres amid the global contest to build new data centres. The company has a 25-strong team working on securing power, and the company has the key land parcels and financial strength to undertake projects, he said.

Citi analysts said that data centre development has been a focus area and noted the company had further upgraded to a global power bank of 4.3GW, from 4GW, with 2.1GW secured.

They said that the company’s overall development work-in-progress remains constant at $12.9bn, and noted Goodman completed $800m of developments in the quarter.

Rents are still rising, with 4.9 per cent like-for-like net property income growth on properties in Goodman’s partnerships.

“We see the upgraded growth guidance and overall power bank of data centre developments as positive for growth outlook both in the short and medium term,” Citi said.