The Goodman Group (ASX: GMG) share price is edging higher on Wednesday morning.
At the time of writing, the industrial property giant's shares are up 0.5% to $32.88.
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Why is the Goodman share price rising?
Investors have been buying the company's shares following the release of its third quarter update.
According to the release, customer demand for its properties remains strong and underpinned annual like for like NPI growth of 4.5%, portfolio occupancy of 96.5%, and a portfolio weighted average lease expiry (WALE) of 4.7 years.
The good news is that property fundamentals in its markets are sound and remain supported by low vacancy rates, positive rental growth, and minimal new supply. It notes that passing rents have increased (through rent reviews) faster than market rents have grown. This has led to the average expected rent reversion to market across the portfolio hitting 16%.
Development pipeline
Goodman highlights that it has a significant and globally diversified development portfolio and continues to progress and position its sites for delivery as appropriate.
Work in progress (WIP) currently sits at $13.7 billion, with the yield on cost (YOC) on its current WIP at 7.1%. YOC on commencements (for the nine months to 2025) is at 9%
Data centres under construction currently represent >50% of Goodman's WIP.
Management commentary
Goodman's CEO, Greg Goodman, is cautiously optimistic on the future. He said:
Long-term structural demand drivers are intact, however, the uncertain economic and trade environment is delaying customer decisions in the logistics space. Desire for modern, sustainable, logistics facilities in central locations, where automation can improve productivity continues. Space is scarce in our markets, and supply in our locations remains limited.
In the data centre space, we continue to see significant capex growth from hyperscale operators as they work to meet rising demand for cloud and AI services. With a globally diverse portfolio of identified development opportunities and a 5GW power bank concentrated in low latency, metropolitan areas, the Group is well placed to support these growing requirements.
Outlook
One slight disappointment that could be holding back the Goodman share price a touch is its outlook statement.
While management has reaffirmed its FY 2025 operating earnings per share growth guidance of 9%, the market has been expecting an upgrade to 10% growth.
So, with one month to go until the end of the financial year, it is possible that analysts are starting to doubt if that will ultimately be the case.
