The artificial intelligence (AI) boom is creating a ripple effect in the unexpected area of the industrial properties market.
AI applications require immense computational power to process vast amounts of data. The AI boom drives the need for more data centres due to the extensive data processing, storage, and real-time analysis requirements of AI technologies.
As AI continues to evolve and integrate into various sectors, the demand for advanced data centre infrastructure will only increase.
The trouble is that this will add pressure to the ongoing shortage of industrial properties near metropolitan areas, led by the consumer shift to online shopping.
Industrial property powerhouse Goodman Group Ltd (ASX: GMG) has been a major beneficiary, with its shares surging 74% over the past year.
But could Brickworks Limited (ASX: BKW) shares be a cheaper alternative to benefit from this industry trend?
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Converting warehouses to data centres
Goodman Group boss Greg Goodman estimated a $50 billion opportunity in data centres in his recent interview with Australian Financial Review. Goodman Group aims to capture this golden opportunity with large-scale developments, as Goodman explained in the shareholder update:
We continue to develop large-scale, high value, data centres, and expand our global power bank to address growing data centre demand as AI usage and cloud computing expands.
This has led to optimism from analysts, with Citi expecting double-digit earnings growth.
After the recent surge, Goodman Group shares are trading at a price-to-earnings (P/E) ratio of 30x and a price-to-book (P/B) ratio of 3.2x based on FY25 estimates by S&P Capital IQ.
Brickworks as a cheaper alternative?
With that in mind, Brickworks shares might present a more affordable entry point for those looking to capitalise on this angle. Although Brickworks is not as prominently recognised as Goodman in the industrial property sector, the company has steadily built a substantial and growing portfolio.
Traditionally known for its building products, Brickworks has strategically diversified into the industry property sector through its joint ventures with Goodman Group.
Brickworks' two joint ventures focus on developing and managing prime industrial real estate. This partnership leverages Goodman's expertise and Brickworks' strong land holdings, creating a robust platform.
Brickworks shares are trading at a P/E ratio of 19x and a P/B ratio of 1.1x on FY25 estimates by S&P Capital IQ, much cheaper than Goodman Group.
While Goodman Group remains a leader in the sector, Brickworks offers a diversified revenue stream from its building products business and its holding in other listed shares, providing additional stability.
For investors looking to capitalise on the industrial property boom at a more reasonable price, Brickworks could be a promising option in my view.
