Is the Goodman Group (ASX: GMG) share price the best REIT of 2020?

Could the Goodman Group (ASX: GMG) share price be the best performing ASX 200 REIT after hitting a record all-time high on Friday?

Lina Lim

Lina Lim holds a Bachelor of Commerce and Bachelor of Economics from Monash University (Australia). She enjoys the analytical aspects of the stock market and hopes that her readers can share the same passion that she does for investing. Lina is also currently undertaking a Masters of Teaching in secondary education, specialising in the Economics and Accounting curriculum. As an aspiring educator, she wants to model by example and to show her students the ropes of the sharemarket. In her spare time, Lina enjoys reading and travelling.

Published November 9, 2020 1:47 pm AEDT

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.

outperforming asx share price represented by row of white eggs with cartoon sad faces with one gold egg with happy face and crown — Image source: Getty Images

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.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.