Goodman’s (ASX: GMG) first-half operating profit per security fell 8% year on year to 59 cents, on lower transactional and performance fees, and development earnings timing. Full-year guidance remains for operating earnings growth of 9% and distributions of 30 cents.

Why it matters: Earnings largely met our expectations, though the timeline for building out the data center pipeline is still somewhat unclear. The group plans to start building 0.5 gigawatts by June 2026, which we estimate will take until fiscal 2028 to finish.

  • Late last year, Goodman established an $14 billion European data center partnership. The 50% stake sell-down to the joint venture partner helped Goodman realize development profits, providing a clearer path to the 9% expected earnings growth in fiscal 2026.
  • We expect more capital partnerships to come, given the enormous size of the data center pipeline. There is an additional 1.3 GW potential power capacity within these campuses; Goodman hopes to break ground after fiscal 2026, although the timing and returns seem highly uncertain.

The bottom line: We maintain our fair value estimate for narrow-moat Goodman of $29 per security. The securities are fairly valued. In contrast to the irrational market exuberance in 2023/24 over Goodman’s data center ambitions, investors are valuing the company more realistically now.

Between the lines: The balance sheet is strong. Gearing (net debt/tangible assets) was 4%, near the bottom of the 0%-25% target range. On a look-through basis, including debt in joint ventures and partnerships, gearing was 18%, which is modest.

  • We like the capital partnering approach, as it derisks data center developments. Rotating partial stakes into joint ventures or partnerships allows Goodman to realize land value while earning development management fees. It also helps maintain substantial headroom on its balance sheet.

Spotlight on Goodman’s data center progress

Goodman operates an own-develop-manage business model. A typical cycle starts from acquiring a site and developing it. Completed projects are either sold or retained in one of Goodman’s funds or partnerships. Goodman typically retains minority stakes in the investment vehicles and continues to manage the sites after completion.

The group’s development-led strategy fuels growth of its asset base. As of December 2025, Goodman’s total assets under management reached AUD 87 billion, tripling the asset base of 10 years ago. Its development pipeline has also experienced significant expansion, growing to AUD 14 billion by December 2025, compared with fiscal 2014’s AUD 3 billion. With a large development pipeline and an active development strategy, we expect AUM to enjoy mid-single-digit percentage growth over the medium term, and the management segment to contribute almost 40% of the group’s midcycle operating earnings.

The pivot toward larger-scale, higher-value projects not only expands pipeline size but also increases project lead time. Today, an average development project takes 24 months to complete, up from 17 months in 2020. This reflects a higher percentage of data center projects, an area of focus for Goodman in the short to medium term.

Despite larger developments, capital management has remained prudent. Most development projects have capital partners involved, with high tenancy precommitment and long leases secured. The company has been rotating properties into its funds or disposing of its assets to external third parties. By doing so, Goodman is redeploying capital to new opportunities and maintaining low leverage on its own balance sheet.

Goodman prefers urban infill locations in core gateway cities, and this adds to the appeal of its portfolio. These locations—typically in established and densely populated neighborhoods and close to end-consumer markets—are supply-constrained. Good locations, combined with structural tailwinds like e-commerce and cloud technology booms, are likely to underpin solid rent growth in the medium term.

Bulls say

  • Structural tailwinds, such as rising e-commerce, supply chain transformation, and cloud technology are likely to continue having a significant bearing on industrial property demand.
  • Goodman’s large development pipeline is supported by its balance sheet capacity and the capability to attract capital partners.
  • Goodman’s investment vehicles are gaining investor inflows given their scale, strong track records, management expertise, and the ability to secure leases prior to development completion.

Bears say

  • Industrial property has benefited from several years of tight supply, and rents have increased dramatically. There is a limit to how much more rents can grow, as tenants may not be able to keep paying higher rents if productivity is not going up at the same pace.
  • Rival REITs are competing to acquire industrial property and establish funds management businesses.
  • Goodman’s data center developments hinge on its ability to secure infrastructure and power. Regulatory approvals and environmental policy are a wild card.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

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Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.