The Goodman Group (ASX: GMG) share price has been the most dominant ASX 200 real estate investment trust (REIT) performer in 2020. Its shares closed at an all-time record high last Friday of $19.66 or an almost 50% return this calendar year. The company also yields a modest 1.50% to top things off.
Best performing ASX200 REIT?
The Goodman share price has outperformed all its mid to large cap REIT cap peers.
This includes the likes of retail REITs such as Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX) which are still down 40% year-to-date. Both companies highlight recovering rental collections and improving customer visitations to its shopping centres in quarterly updates this month. They also both revealed the intention to pay a distribution late this year or early next year subject to circumstances.
Even pure industrial REITs such as Centuria Industrial REIT (ASX: CIP) and APN Industria REIT (ASX: ADI) are still down 10% year-to-date. This is despite significant improvements in their share prices since COVID-19-related March lows.
What’s driving the Goodman share price?
The Goodman Group operates a unique real estate portfolio compared to more ‘traditional’ office and retail REITs. The company owns a highly industrial concentrated portfolio that focuses on real estate in urban infill market where supply is limited and demand is driven by consumers. The scarcity of land in these areas drives increased intensity of use. This includes multi-story logistics, data centres and other commercial uses that provide potential value add opportunities.
On 5 October, Goodman released its first quarter trading update that outlined strong real estate fundamentals with demand being driven by “customers adapting to the acceleration in online and digital activity and more intensively utilisating available space in our markets”. These strong underlying characteristics have allowed the company to maintain high occupancy rates, a strong development pipeline driven by demand and increasing assets under management. The trading update reaffirms the group’s forecast FY21 operating earnings per security of 62.7 cents, an increase of 9% on FY20.
Credit Suisse has followed up on its quarterly update by raising its Goodman share price target from $17.34 to $19.84 with a neutral rating.
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Returns as of 6th October 2020
Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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