Goodman Group

The Business

Goodman owns, develops and manages industrial and data centre property through 26 partnership vehicles holding $75.4 billion of assets under management, collecting fees on capital it does not have to fully own. Development earned $1.79 billion in FY26 (56% of operating earnings), property investment $722 million, and funds management $690 million, a segment still recovering from a trough in performance fees. The distinguishing asset is the power bank: 6.4GW of secured grid capacity across 16 cities, taking 3-5 years to procure, now underpinning a $19.7 billion work-in-progress pipeline that is 78% data centres.

Recent Performance

Operating earnings grew 12.3% in FY26 to $3.2 billion, on top of a base that itself grew strongly the prior year, so some of that growth reflects an easy comparison as much as new momentum. Earnings per share rose 10.1% to 129.9 cents. The management fee line fell 17.6% as performance fees troughed at $206 million, masking otherwise solid underlying growth in development and property investment. The market has re-rated the stock well ahead of these results, pricing in data centre delivery years before most of the pipeline converts to income.

Outlook

We expect operating earnings growth to decelerate over the next few years as development volumes normalise off recent highs and management fees recover from their current trough toward a more typical run rate. Margins should hold broadly steady near current levels, but a genuine cost is building beneath the surface: share-based pay is growing at 31% a year and will increasingly separate headline earnings per share from true per-share value creation. Property investment income should grow steadily on the back of double-digit average rental reversions as existing leases roll to market rents.

Key Risks

The largest risk to the thesis is a slowdown in hyperscaler capital spending. Roughly three-quarters of the $19.7 billion work-in-progress pipeline remains uncommitted, so a genuine demand shock would cascade into rising vacancy, write-downs on partially built assets, and lower fee income across the partnership platform. This is effectively a binary risk: there are no early warning signs today, but the concentration in a single demand source, AI and cloud infrastructure spending, leaves little room to diversify away from it if that spending slows. A second risk sits in capitalisation rates. Australian bond yields are near cycle highs, and a further sustained move upward would compress property valuations across the portfolio within roughly a year, even though Goodman's low gearing and hedged debt book provide more protection than most leveraged peers can claim. The third and slowest-moving risk is compensation: share-based pay is compounding faster than almost any other cost line in the business, and if left unaddressed it will continue to widen the gap between the operating earnings figure management reports and the economic value shareholders actually receive.

What to Watch

The thesis-defining event is data centre pre-commitment data through 2027, which will confirm whether hyperscaler demand is structural or cyclical.

• 12-18 months Data centre pre-commitment rates — a meaningful rise from current levels would validate the structural demand thesis underpinning the pipeline.
• 12-24 months Market re-rating of the discount rate applied to Goodman toward broader REIT norms — the single largest swing factor for how the market prices the business going forward.

Company Description

Goodman Group operates an own-develop-manage model across industrial property and, increasingly, data centres. Development accounted for 56% of FY26 operating earnings ($1.79 billion), delivering built assets that are then recycled into property investment or third-party partnerships. Property investment contributed 23% ($722 million) from Goodman's direct property holdings and equity-accounted stakes. Funds management contributed the remainder ($690 million), earning base and performance fees on $75.4 billion of assets held across 26 partnership vehicles with 55 institutional investors. This structure lets Goodman develop and manage far more real estate than its own balance sheet could hold outright.

Where the Growth Is

Data centre development is the growth engine, now 78% of the $19.7 billion work-in-progress pipeline, which itself grew 53% year-on-year. Completions are accelerating as this pipeline converts into income. Near-term, this drives roughly 8% annual development earnings growth, with the added benefit that completed assets transfer into recurring property investment and management income over time, gradually shifting Goodman's earnings mix toward more predictable, annuity-style cash flow.

Competitive Position

Goodman's advantage rests on physical scarcity rather than brand or price. Its 6.4GW of secured power positions across 16 cities took years to assemble and cannot be shortcut; competitors starting today face a 3-5 year procurement lead time before they can even begin construction. Combined with a metro land bank accumulated over decades, in a business where data centres increasingly need to sit close to end users for latency reasons, this creates a genuine barrier that is currently widening as Goodman continues to add power capacity faster than the market. Prologis has recently entered the data centre space, which validates the opportunity but also confirms competition is coming. We expect the advantage to hold for roughly 5-7 years before it narrows.

Management & Capital Discipline

Founder-CEO Greg Goodman has run the business for over two decades, delivering an unbroken run of guidance beats and initiating the data centre pivot years ahead of global peers. Management retains around 77% of earnings, reinvesting at returns above 8%, and has avoided dilutive acquisitions, funding growth through one well-timed equity raise rather than serial capital raisings. The honest qualifier: the primary metric management reports, operating earnings per share, excludes $466 million of share-based pay growing at 31% a year, which flatters headline growth relative to the economic reality shareholders actually experience.

Financial Position

Goodman's balance sheet is unusually conservative for its sector: headline gearing of 6.5%, roughly a fifth of typical global peers, with 86% of debt hedged and no near-term maturities. Interest cover is comfortably high. This gives Goodman capacity to keep investing through a downturn that would force more leveraged competitors to retreat, and provides a real cushion against capitalisation rate risk.