GOODMAN LOOKS TO GO VERTICAL

Goodman group is preparing to launch a range of initiatives for new-look vertical warehouses across Sydney and Melbourne in coming months.

Speaking at the half-year results on Wednesday, chief executive Greg Goodman said areas such as South Sydney, and parts of inner Melbourne, where land values are high, lend themselves to vertical industrial properties.

He confirmed Goodman is working in a ”number of initiatives” which are expected to be announced in the next six to nine months. Goodman already has extensive multi-storey sites across Asia.

”Increasing urbanisation, rising consumerism and changes in technology, are creating increased competition between residential, higher density industrial, e-commerce and data centre use, driving rents and land prices in areas where supply is already constrained,” Mr Goodman said.

”Scarcity of sites in infill areas close to urban centres and consumers, combined with competing for demand for quality locations is creating land use intensification. We are increasingly seeing a shift towards multi-storey industrial facilities or changes of use to commercial and residential.”

Mr Goodman said, as one of the ”the world leaders in multi-storey logistics developments, Goodman is well placed to benefit from this growing trend”.

According to CLSA, Goodman delivered another ”impressive result”, with earnings per security growth of 7.9 per cent, ahead of their expectation, and also upgraded its EPS guidance to +8 per cent, from +6 per cent, which was ahead of both CLSA and consensus.

”Similar to the last two results, this was largely driven by lower net interest costs and tax, with earnings before interest and tax (EBIT) broadly flat, reflecting dilution from asset sales in 2017 and 2018 financial years an and the first half of 2018 and the associated drag on management income,” CLSA says.

”With low gearing of just 6.4 per cent and $2.3 billion of cash, Goodman remains in a strong and enviable position with flexibility for capital management, acquisitions and development. ”

CLSA analysts added that with asset sales largely complete, Goodman’s strategy is paying off with strong like-for-like income growth of 3 per cent and high occupancy of 98 per cent to be enhanced by development completions, driving both net property income and management income.

According to UBS, given the land constraints, Goodman is expecting to develop a greater number of multi-storey assets across Asia and into Australia, particular for brownfield projects. The yield on the cost was said to be similar to that of a traditional industrial asset.

The plans come as Sydney metro industrial areas are in great need of an upgrade to meet the changing needs of tomorrow’s industries, according to Colliers International.

Suburbs like Artarmon and Alexandria have experienced a phenomenal amount of capital growth in the last 24 months, whilst some areas have nearly doubled.

“This growth has stemmed from organic market growth but largely by the increasing pressure of businesses that need to remain central to the Sydney CBD or the communities it supports,” Kellie Tattersall, director of industrial at Colliers International.

“Sydney has over 350 cranes in the sky and assembly, less than 5 per cent of which would be seen for the development of much needed industrial products.”

Ms Tattersall said a lot of Industrial lands in the metro areas have been repositioned into high-rise dwellings whilst the remaining areas are under continuous pressure from local businesses to support these growing communities.

According to Colliers, current council planning controls are deterring development within these areas, by not providing higher controls to encourage expansion, to the extent that investors/owner occupiers can offer nearly double to what a developer can for a site.

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