expert evidence report - mount alexander shire council

Economic Expert Witness Statement Amendment C73 to the Mount Alexander Planning Scheme and combined Planning Permit Application PA072/2013 Justin Ganly

Prepared for Lascorp Development Group (Aust) Pty Ltd 21 April 2017

Deep End Services Deep End Services is an economic research and property consulting firm based in Melbourne. It provides a range of services to local and international retailers, property owners and developers including due diligence and market scoping studies, store benchmarking and network planning, site analysis and sales forecasting, market assessments for a variety of land uses, and highest and best use studies.

Contact Deep End Services Pty Ltd Suite 304 9-11 Claremont Street South Yarra VIC 3141

T +61 3 8825 5888 F +61 3 9826 5331 deependservices.com.au

Enquiries about this report should be directed to:

Justin Ganly Managing Director [email protected]

Document Name Lascorp report - Mt Alexander Am C73 & Permit Application C072-2013 - Economic expert witness statement - Justin Ganly - 21 Apr 17.docx

Disclaimer This report has been prepared by Deep End Services Pty Ltd solely for use by the party to whom it is addressed and by Planning Panels Victoria. Accordingly, any changes to this report will only be notified to those parties. Deep End Services Pty Ltd, its employees and agents accept no responsibility or liability for any loss or damage which may arise from the use or reliance on this report or any information contained therein by any other party and gives no guarantees or warranties as to the accuracy or completeness of the information contained in this report where this has been provided by another party.

This report contains forecasts of future events that are based on numerous sources of information as referenced in the text and supporting material. It is not always possible to verify that this information is accurate or complete. It should be noted that information inputs and the factors influencing the findings in this report may change hence Deep End Services Pty Ltd cannot accept responsibility for reliance upon such findings beyond six months from the date of this report. Beyond that date, a review of the findings contained in this report may be necessary.

This report should be read in its entirety, as reference to part only may be misleading.

mailto:[email protected]

Lascorp report - Mt Alexander Am C73 & Permit Application C072-2013 - Economic expert witness statement - Justin Ganly - 21 Apr 17.docx

Deep End Services

1 Introduction 1 1.1 Background 1 1.2 Approach 1 1.3 Abbreviations 2 1.4 Expert witness details 3 2 Am C73 & Planning Permit Application C072/2013 6 2.1 Purpose 6 2.2 Am C73 6 2.3 Permit Application C072/2013 7 2.4 Exhibition 7 3 Strategic review – Am C61 8 3.1 Background 8 3.2 Panel hearing and report 9 3.3 Implementation 12 4 Need and economic impact 14 4.1 Introduction 14 4.2 Catchment area 15

Definition 15 Population 16 Food, Groceries & Liquor spending 16

4.3 Need 17 Existing supermarket floorspace provision 17 Comparison to national averages 17 Comparison to similar markets 18 Quantification 19

4.4 Economic impact 19 Sales forecast 19 Sources of sales 20 Benefits 21

5 Submissions 22 6 Conclusion 24

Appendices

Appendix A Curriculum vitae for Justin Ganly

Contents


Deep End Services

Tables + Figures

Figure 1—Am C73 site boundary 7 Figure 2—Proposed Castlemaine Commercial Centre Boundary Map 9 Figure 3—Adopted Castlemaine Commercial Centre Boundary Map 12 Figure 4—Proposed Altered Castlemaine Commercial Centre Boundary

Map 13 Figure 5—Castlemaine ALDI catchment area 15

1


Deep End Services

01 This statement addresses economic issues relevant to the proposed development of a new supermarket within Castlemaine.

02 The statement has been prepared for Lascorp Development Group (Aust) Pty Ltd (“Lascorp”).

03 The statement is to assist the Panel formed to consider Amendment C73 (“Am C73”) to the Mount Alexander Planning Scheme (“Scheme”) and combined planning permit application PA072/2013 (“Permit Application”).

04 The Permit Application is in respect of the land known as 98 Forest Street, 2 and 2A Urquhart Street and 2 Duke Street, Castlemaine. Collectively this land is the subject site on which the proposed supermarket is to be developed.

05 The tasks completed in the preparation of this statement have included:

• Inspecting all retail facilities within Castlemaine and surrounding townships of relevance.

• Reading and considering relevant background documents to Am C73 and the combined Permit Application.

• Reading and considering documents and reports produced or commissioned in relation to the Scheme (particularly those for Amendment C61).

• Considering relevant submissions made regarding Am C73 and the combined Permit Application.

Introduction

1.1 Background

1.2 Approach

2


Deep End Services

06 The following abbreviations are used in this statement:

ABBREVIATION EXPLANATION

ABS Australian Bureau of Statistics

Am C61 Amendment C61 to the Mount Alexander Planning Scheme

Am C73 Amendment C73 to the Mount Alexander Planning Scheme

CCCS Castlemaine Commercial Centre Study (Final Report), SGS Economics and Planning for Mount Alexander Shire Council, 31 October 2012

Council Mount Alexander Shire Council

FG&L Food, Groceries & Liquor

Lascorp Lascorp Development Group (Aust) Pty Ltd

NWS North West Supermarkets

Permit Application Permit Application PA072/2013

Scheme Mount Alexander Planning Scheme

1.3 Abbreviations

3


Deep End Services

The following expert witness details are provided as required in Planning Panels Victoria’s Guide to Expert Evidence.

Name and address of expert

Mr Justin Ganly Managing Director Deep End Services Pty Ltd Suite 304, 9-11 Claremont Street South Yarra Victoria 3141

Expert’s qualifications and experience

• Graduate Diploma of Applied Finance & Investment, Securities Institute of Australia.

• Bachelor of Engineering (Chemical) (First Class Honours), University of Melbourne.

• Managing Director of Deep End Services since 2003. • Retail and property consultant for KPMG, Coopers & Lybrand and Coles Myer

from 1993 to 2003. • A full CV is included at Appendix 1.

Expert’s area of expertise to make report

• Preparation and presentation of economic expert witness evidence. • Preparation of sales and impact forecasts for new, expanded and refurbished

supermarkets. • Feasibility analysis for property owners and developers of all forms of property. • Activity centre network planning. • Thorough understanding of retail and commercial land use and development

patterns throughout Victoria. • Demographic analysis. • Population forecasting.

1.4 Expert witness details

4


Deep End Services

Instructions that defined the scope of the report

I received written instructions from Lascorp on 9 February 2017 to prepare a statement of evidence for the Panel considering Am C73 and the Permit Application which was to address the following:

1. “An assessment of the trade area of relevance for assessment of the economic merits of the proposed supermarket.

2. The competitive context within which the proposed new supermarket would operate.

3. An assessment of the need and demand for the proposed supermarket, as well as the likely economic impacts that would result from its development, including an assessment of the anticipated net community benefit outcome.”

Subsequently, the Panel’s Directions (issued on 17 March 2017) included the following at paragraph 15:

“At the Hearing, it would assist the Panel if the following matters are addressed in submissions by the Council, the Proponent and any other parties as relevant:

1) The economic impact of the proposed supermarket on the Castlemaine Activity Centre and any other centre within the supermarket’s defined primary and secondary trading catchments.

2) Interactions with other planning strategies such as retail, economic or housing strategies.”

Facts, matters and assumptions upon which the report proceeds

• The first full financial year of trading for the proposed new supermarket would be 2019/20.

• All spending or sales data is quoted in future dollars where appropriate and includes GST.

Documents, materials and literature used in preparing this report

• Stated in relevant sections of my report.

Summary of the opinions of the expert

• Am C73 and the combined Permit Application will allow for the development of a new 1,500 sqm supermarket in Castlemaine.

• The supermarket – assumed to be ALDI – would be developed on a site which has been endorsed for such development in recent strategic work undertaken by Council.

• Castlemaine has a remarkable level of undersupply of supermarket floorspace and the proposed development will only go some way to addressing this undersupply.

• Other benefits to the local community will include increased price competition, greater choice, reduced travel requirements and more employment.

5


Deep End Services

• Impacts on other retailers – mitigated by a significant contribution from reduced escape expenditure – will be largely focussed on the successful existing major supermarket within the Castlemaine Commercial Centre and the viability of the Centre will, in no way, be threatened.

• I conclude, therefore, that the proposed development will deliver a substantial positive net community benefit.

Provisional opinions not fully researched

• None.

Questions outside the expert’s expertise

• None.

Report incompleteness or inaccuracies

• None.

6


Deep End Services

07 The intent of Am C73 and the combined Permit Application is to facilitate the development of a new supermarket within Castlemaine.

08 The supermarket is to comprise 1,500 sqm of floorspace and is to be provided with 118 car spaces on-site and a further 21 spaces on-street.

09 Am C73 has been prepared by the Mount Alexander Shire Council (“Council”), which is the planning authority for this amendment.

10 The amendment has been requested by Environmental Resources Management Australia Pty Ltd at the request of Lascorp.

11 Am C73 applies to the land – with a total area of approximately 5,443 sqm – at:

• 98 Forest Street (Lot 1 on TP019291T); • 2 Urquhart Street (CA 8 Sec 48 Parish of Castlemaine, Vol. 6031 Fol. 105); • 2A Urquhart Street (CA 8A Sec 48 Township of Castlemaine, Vol. 8331 Fol. 623);

and • 2 Duke Street (CA 9 Sec 48 Township of Castlemaine, Vol. 1150 Fol. 836).

12 The boundary of the Am C73 land is indicated on Figure 1.

13 98 Forest Street is the largest of the lots and was, until 1973, occupied by an LPG plant. This lot is in the Public Use Zone (Schedule 1) (“(PUZ1”) and is often referred to as the “former gasworks site”.

14 The other three lots are in the General Residential Zone (Schedule 1) (“GRZ1”) and are occupied by single dwellings in each case.

Am C73 & Planning Permit Application C072/2013

2.1 Purpose

2.2 Am C73

7


Deep End Services

15 As set out in the Explanatory report, Am C73 seeks to:

• Rezone the site to the Commercial 1 Zone. At present, 98 Forest Street is currently zoned Public Use 1 (Service and Utility), whilst 2 and 2A Urquhart Street and 2 Duke Street are currently zoned General Residential Zone – Schedule 1 (GRZ1); and

• Apply the Design and Development Overlay, Schedule 14 (Castlemaine Township Gateway) to the site.

16 The Permit Application is to allow for:

• The development of buildings and works to facilitate the operations of a 1,500 sqm supermarket (including a loading dock which would be accessed from Duke Street);

• Customer vehicle access from Urquhart Street; • An on-site car park containing 118 car spaces; and • Landscaping within and surrounding the development.

17 Am C73 and the combined Permit Application were exhibited from 28 October 2016 to 9 January 2017. A total of 32 submissions (and one late submission) were received in relation to the exhibited documents.

Figure 1—Am C73 site boundary

Source: Am C73 Explanatory Report

2.3 Permit Application C072/2013

2.4 Exhibition

8


Deep End Services

18 Amendment C61 to the Mount Alexander Planning Scheme (“Am C61”) was prepared by Council and exhibited between August and October 2014.

19 Am C61 proposed to implement a thorough review of the Scheme based on a number of reports and strategic reviews.

20 Of particular interest were the components of Am C61 which involved proposed changes to the Scheme resulting, in part, from the recommendations of the report Castlemaine Commercial Centre Study (Final Report) (“CCCS”), prepared by SGS Economics and Planning for Council on 31 October 2012.

21 The CCCS was to guide the development of the Castlemaine Commercial Centre over the next 10 to 15 years, with the Executive Summary containing the following critical statement:

“The Commercial Centre will accommodate an additional supermarket facility, specialty shops and small niche businesses. Growth in cafes and restaurants related to tourism and a new local demographic will occur.”

22 The CCCS assessed that, “as an order of magnitude guide”, an additional 6,300 sqm of retail floorspace could be required in Castlemaine by 2026.

Strategic review – Am C61

3.1 Background

9


Deep End Services

23 The CCCS set out the requirement that all significant new retail and/or commercial development should occur within the Castlemaine Commercial Centre with the boundary as indicated below:

24 The gasworks site was indicated as being outside of the Commercial Centre boundary but with an annotation to:

“Explore potential to expand the Commercial Centre on former gasworks site subject to further assessment”

25 The C61 Panel hearing took place in Castlemaine during the week commencing 2 February 2015, with the Panel report released on 25 March 2015.

26 Two experts were called on economic issues:

• Sean Stephens (Essential Economics) for Council; and • Tony Dimasi (MacroPlanDimasi) for Lascorp.

Figure 2—Proposed Castlemaine Commercial Centre Boundary Map

Source: CCCS

3.2 Panel hearing and report

10


Deep End Services

27 The statement produced by Mr Stephens – which was essentially a review of the CCCS – included the following as Conclusions at page 14:

• “The Castlemaine Commercial Centre Study represents a policy framework that is based on sound strategic principles. The study adopts a robust methodology and, with some specific exceptions, is generally consistent with my professional views.

• The total forecast increase in retail floorspace in the Castlemaine Commercial Centre of 6.200m2 by 2026 is reasonable, although at the conservative end of normal expectations in view of what I detect is potentially an undersupply of current local supermarket facilities.

• The identification of the former bus depot site and the former gas works site as potential locations for future retail and commercial development is sensible, and ensures that the Castlemaine Commercial Centre Study responds to future community need.

• In my view, any issues associated with the integration of the former gas works site into the balance of the Castlemaine Commercial Centre can be resolved through an appropriate set of urban design initiatives. This is assisted by what would be a continuous link of land in the C1Z between the site and the balance of the centre.”

28 Mr Dimasi’s statement focussed on the need for additional supermarket floorspace within Mount Alexander and an assessment of the net community benefit or disbenefit resulting from the development of a new supermarket on the Lascorp site.

29 Mr Dimasi’s overwhelming conclusion was that Castlemaine was underprovided with supermarket floorspace, with the deficit of the order of 5,800 sqm to 6,300 sqm in 2014/15 and increasing to 7,700 sqm to 8,300 sqm by 2025/26 without the development of new supermarket floorspace.

30 Dimasi also concluded that the development of the proposed supermarket – assumed to be operated by ALDI – on the Lascorp site would result in a positive net community benefit due to:

• Improved convenience; • Strengthening of the Castlemaine Commercial Centre; • Lower food and grocery prices; and • Increased local employment.

31 The C61 Panel Report addressed retail issues within Section 4.2 (Retailing in Castlemaine), stating:

“The issues are whether 98 Forest Street Castlemaine (the ‘gasworks’ site) should be included in the ‘Castlemaine Commercial Centre’ and whether various references to retailing in Castlemaine are appropriate.”

32 The Panel recommended that the gasworks site should be included within the Castlemaine Commercial Centre, reflecting the revised position taking by Council during the course of the Panel hearing.

11


Deep End Services

33 The Panel’s recommendation was based upon:

• A number of planning documents and investigations which had adopted the view that “the gasworks site is (or will become) part of the ‘town centre’”;

• The Scheme having included the site within the ‘Castlemaine Town Centre’ on the Castlemaine Land Use Framework (Plan 3) in Clause 21.03;

• The demonstrated need for additional supermarket floorspace within Castlemaine;

• The lack of alternative sites of a suitable size within the Castlemaine Commercial Centre; and

• The view that the site could be successfully linked to existing commercial areas to the north and west via careful design and development.

34 However, the Panel also recommended against adoption of three conditions which Council sought to impose in relation to the future rezoning and development of the gasworks site. These comprised:

• “A general requirement for ‘further assessment’. • The continued consolidation of the Castlemaine Commercial Centre. • The redevelopment of the former bus depot site in Forest Street.”

35 Regarding references to the CCCS, the Panel recommended that the study be retained as Reference Document to the Scheme.

36 However, the conservative nature of current and future retail floorspace requirements set out within the CCCS – as confirmed by both Mr Stephens and Mr Dimasi – resulted in the Panel recommending that the following specific floorspace projections should be deleted from the ‘Commercial’ section of Clause 21.09-1:

The study estimates that an additional 6,300 square metres of retail space and 2,000 square metres of office space could be accommodated to 2026 to respond to population growth.

12


Deep End Services

37 Changes to the Scheme implemented via Am C61 were gazetted on 28 April 2016.

38 Of most relevance to Am C73 were the adoption of the CCCS as a Reference Document and the map inserted in Clause 21.12-2 (Castlemaine Commercial Centre) and copied below which shows that the Centre is now defined to include the gasworks site:

3.3 Implementation

Figure 3—Adopted Castlemaine Commercial Centre Boundary Map

Source: Mount Alexander Planning Scheme

13


Deep End Services

39 It is noted that the definition of the Castlemaine Commercial Centre is intended to be altered slightly via Am C73 to also include the land to the immediate south of the gasworks site at 2 & 2A Urquhart Street and 2 Duke Street as shown in the exhibited proposed replacement map below:

Figure 4—Proposed Altered Castlemaine Commercial Centre Boundary Map

Source: Am C73 – 21.12

14


Deep End Services

40 This section of the statement addresses the need for and economic development of the proposed 1,500 sqm supermarket on the Lascorp site in Castlemaine.

41 For the purposes of this assessment, it has been assumed that the supermarket will be operated by ALDI.

42 In my opinion, the size of the proposed store and the presence of IGA with two stores in the Castlemaine market means that ALDI is the logical operator of the supermarket.

43 I have also been informed that there have been discussions with ALDI regarding the tenancy.

44 However, should the proposed supermarket be operated by a supermarket chain other than ALDI it would not have a material impact on my subsequent analysis and conclusions.

Need and economic impact

4.1 Introduction

15


Deep End Services

Definition

45 An ALDI at Castlemaine would draw sales from the following key catchment area sectors:

• Primary – the urban area of Castlemaine; and • Secondary – the balance of the Shire of Mount Alexander (including Maldon).

46 These areas are shown on Figure 5.

Figure 5—Castlemaine ALDI catchment area

Source: Deep End Services; MapInfo

47 The catchment area is the same as that adopted in the CCCS.

48 I note that Mr Dimasi adopted the Shire of Mount Alexander as his Primary sector and included areas to the south such as Daylesford and Kyneton in his Secondary sector in his evidence for Am C61.

49 Whilst an ALDI at Castlemaine would draw some sales from these additional areas, I am satisfied that adoption of the Shire of Mount Alexander as the catchment area is most appropriate (and allows for easy comparison to the CCCS).

4.2 Catchment area

16


Deep End Services

Population

50 The historical and forecast population of the catchment area is set out in the table below.

Sector 2006 2011 2016 2020 2026

Primary 9,033 9,305 9,774 10,033 10,493

Secondary 8,271 8,567 8,723 8,863 9,067

Total catchment area 17,304 17,872 18,497 18,896 19,560

Average change (%pa)

- 0.6% 0.7% 0.5% 0.6%

51 It is evident that the catchment area population has been growing at an average rate of 0.7% per annum for the past decade, with the Primary sector (i.e. Castlemaine) being responsible for more than 60% of this growth.

52 Looking forward, the pace of growth is expected to decline only marginally to 0.6% per annum (or about 100 people per year), again with most growth being concentred within the Primary sector.

Food, Groceries & Liquor spending

53 The historical and forecast spending by catchment area residents on Food, Groceries & Liquor (“FG&L”) is set out in the table below:

Sector 2011 2016 2020 2026

Primary $54.2m $62.8m $72.1m $90.2m

Secondary $49.0m $56.6m $65.2m $81.1m

Total catchment area $103.2m $119.4m $137.3m $171.3m

Average change (%pa) - 3.0% 3.6% 3.8%

54 Catchment area residents were estimated to have spent $119.4 million on FG&L products in 2016, with Primary sector residents spending $62.8 million and Secondary sector residents spending $56.6 million.

55 Looking forward, the total catchment area spend on FG&L products is forecast to grow by 3.6% per annum to reach $137.3 million in 2020 and then by 3.8% per annum to reach $171.3 million in 2026.

Table 1—Catchment area population, 2006-2026

Source: Deep End Services; ABS; Victoria in Future 2016

Table 2—Catchment area Food, Groceries & Liquor spending, 2011-2026

Source: Deep End Services; Deloitte Access Economics; MarketInfo

17


Deep End Services

Existing supermarket floorspace provision

56 There are currently three supermarkets located within the Castlemaine catchment area, comprising two in Castlemaine and one in Maldon (i.e. within the Secondary sector).

57 All three are IGA-branded, with details as follows:

• Maxi SUPA IGA Castlemaine – located 300 metres west of the Lascorp site, this is Castlemaine’s largest supermarket with estimated floorspace of 2,500 sqm (including liquor).

• Castlemaine Maddern’s IGA Plus Liquor – located 900 metres north-west of the Lascorp site, this freestanding supermarket comprises approximately 750 sqm of floorspace (including liquor).

• Maldon IGA Plus Liquor – located 16 km north-west of Castlemaine, this small strip-based supermarket contains an estimated 270 sqm of floorspace (again, including liquor).

58 It is therefore estimated that total supermarket floorspace within the Castlemaine catchment area is as follows:

• Primary 3,250 sqm • Secondary 270 sqm • Total catchment area 3,520 sqm

59 These estimates reflect supermarket floorspace provision rates as follows:

• Primary 0.33 sqm per capita • Secondary 0.03 sqm per capita • Total catchment area 0.19 sqm per capita.

Comparison to national averages

60 The average provision of supermarket floorspace in Australia is currently 0.34 sqm per capita.

61 The provision rate in the five major capital cities is lower than average at 0.31 sqm per capita due, in part, to residents of these cities having access to a wider array of specialty food retailers and to higher land values.

62 Conversely, the supermarket provision rate outside of the five major capital cities is significantly higher at 0.39 sqm per capita.

63 On this basis, the Castlemaine catchment area is undersupplied as it has just 0.19 sqm per capita of supermarket floorspace.

64 Using the population estimates and forecasts supplied earlier in this statement, this is equivalent to an undersupply of 3,700 sqm in 2016 (i.e. (0.39 – 0.19) * 18,497), increasing to 3,800 sqm in 2020.

4.3 Need

18


Deep End Services

Comparison to similar markets

65 There are 13 towns in regional Victoria with a population between 6,000 and 12,000. Castlemaine sits near the middle of the range with a population of 9,774 at June 2016.

66 The existing supermarket provision within these towns is provided within the table below:

Table 3—Supermarket provision in Victoria regional towns with populations between 6,000 and 12,000

Town 2016 township population

Supermarket brands

(C = Coles WW = Woolworths FW = FoodWorks)

No. of supermarkets

Largest supermarket Total supermarket floorspace

Supermarket floorspace provision

(using township population)

Drouin 11,613 C, WW 2 3,700 sqm (WW) 5,730 sqm 0.49 sqm/capita

Colac 11,538 C, WW, ALDI, IGA 4 4,100 sqm (WW) 7,408 sqm 0.64 sqm/capita

Swan Hill 10,204 C, WW, ALDI 3 3,867 sqm (WW) 8,082 sqm 0.79 sqm/capita

Portland 9,953 WW, ALDI, IGA 3 4,667 sqm (WW) 7,719 sqm 0.78 sqm/capita

Castlemaine 9,774 IGA (2) 2 2,500 sqm (IGA) 3,250 sqm 0.33 sqm/capita

Benalla 9,157 C, WW, ALDI 3 3,900 sqm (WW) 8,326 sqm 0.91 sqm/capita

Hamilton 9,077 C, WW, ALDI, IGA 4 4,091 sqm (WW) 9,391 sqm 1.03 sqm/capita

Wonthaggi 8,164 C, WW, ALDI, IGA 4 4,408 sqm (C) 10,812 sqm 1.32 sqm/capita

Yarrawonga 7,533 WW, IGA 2 3,693 sqm (WW) 5,173 sqm 0.69 sqm/capita

Maryborough 7,329 C, WW, ALDI 3 4,487 sqm (WW) 9,077 sqm 1.24 sqm/capita

Kilmore 7,066 C, ALDI, FW 3 2,860 sqm (C) 5,403 sqm 0.76 sqm/capita

Ararat 6,928 WW, ALDI, IGA 3 3,600 sqm (WW) 7,739 sqm 1.12 sqm/capita

Lakes Entrance 6,445 WW, ALDI, FW 3 3,674 sqm (WW) 6,456 sqm 1.00 sqm/capita

Average excl Castlemaine

8,751 - - - 7,610 sqm 0.87 sqm/capita

Source: Deep End Services; ABS

67 Castlemaine stands out as being clearly undersupplied with supermarkets when compared to the peer set of Victorian towns, with the provision rate of 0.33 sqm per capita for the township being 0.54 sqm per capita below the peer average of 0.87 sqm per capita for the other 12 townships.

68 This is equivalent to a current undersupply of 5,300 sqm (i.e. (0.87 – 0.33) * 9,774) which will increase to 5,400 sqm by 2020 as the Castlemaine township’s population – reflected in the Primary sector forecasts – grows.

19


Deep End Services

Quantification

69 The two methods used in this statement to quantify the need for further supermarket floorspace within Castlemaine result in the current undersupply being estimated as between 3,600 sqm and 5,300 sqm and that this will grow to between 3,700 sqm and 5,400 sqm by 2020.

70 The proposed ALDI of 1,500 sqm will, therefore, only go part way to addressing the undersupply of supermarket floorspace within Castlemaine (as would other minor additions to existing supermarket operations as previously mooted in Am C61 proceedings).

Sales forecast

71 The sales forecast for the proposed ALDI at Castlemaine in its potential first full financial year of trading is $13.8 million.

72 As set out below, this forecast has been generated on a catchment area market share basis, with 20% of sales expected to be sourced from non-FG&L categories such as electrical goods and homewares and 18% of sales being generated by non-catchment area residents.

FG&L Non-FG&L Total

Sector Market size Market share Sales Sales (@20%)

Sales

Primary $72.1m 7.2% $5.2m - -

Secondary $65.2m 6.0% $3.9m - -

Sub-total catchment

$137.3m 6.6% $9.1m - -

Beyond catchment (@18%)

- - $2.0m - -

Total - - $11.1m $2.7m $13.8m

73 A first-year sales figure of $13.8 million for ALDI at Castlemaine would represent a trading level of $9,200 per sqm. In my opinion, this figure would be attractive to ALDI.

74 I also note that ALDI has already opened supermarkets in 23 Australian townships with smaller populations than Castlemaine (including 9 at Benalla, Hamilton, Wonthaggi, Maryborough, Ararat, Lakes Entrance, Seymour, Leongatha and Cowes within regional Victoria).

4.4 Economic impact

Table 4—Sales forecast for Castlemaine ALDI, 2019/20

Source: Deep End Services

20


Deep End Services

Sources of sales

75 The proposed ALDI supermarket at Castlemaine would generate sales from three distinct sources:

• Retailers located elsewhere within the Castlemaine Commercial Centre; • Retailers located in the balance of the catchment area (including Maldon); and • Retailers located beyond the catchment area.

76 The CCCS identified the Castlemaine Commercial Centre as containing 15,390 sqm of retail floorspace, recording total retail sales of $77.0 million (adopting an average trading level of $5,000 per sqm) but only capturing 41% of catchment area spending (i.e. 59% escape spending).

77 Mr Dimasi agreed with the CCCS estimate of escape spending (with an under-estimate of local retail spend per capita rates being offset, in his opinion, by the lack of consideration of other retail facilities at Maldon, in particular, within the catchment area).

78 The level of escape spending from the catchment area is unusually high but reflects, in part, the large undersupply of supermarket floorspace within Castlemaine.

79 Consequently, the introduction of ALDI would have a relatively minor impact on retailers within the catchment area, with more than half of the store’s sales expected to be redirected from other retailers located beyond the catchment area in locations also containing ALDI stores such as Bendigo (4 stores), Maryborough and Melbourne.

80 Net impacts on existing retailers are forecast as follows due to the opening of the proposed ALDI in Castlemaine:

• Castlemaine Commercial Centre -$5.5m • Balance of catchment area -$0.3m • Sub-total catchment area -$5.8m • Beyond catchment area -$8.0m • Total -$13.8 m

81 The majority of the one-off impact on retailers within the Castlemaine Commercial Centre would be experienced by the Maxi SUPA IGA supermarket. However, the dominant position afforded to this store in the Castlemaine market place means it a relatively high volume store and should, in no way, be threatened by the opening of ALDI.

82 Other impacts on retailers operating within the Castlemaine Commercial Centre would be relatively minor, as they would be on other retailers located elsewhere in the catchment area.

83 Indeed, there will be some retailers (and service providers) within the Castlemaine Commercial Centre which record increases in sales and activity as a result of the $8.0 million reduction in spending to retailers located outside of the catchment area.

21


Deep End Services

Benefits

84 The development and operation of the proposed ALDI at Castlemaine would deliver the local community a number of benefits including:

• 20 direct and 23 indirect full-time equivalent (“FTE”) man-years of local employment during construction.

• 15 direct and 9 indirect FTE local jobs on an ongoing basis due to the operation of the supermarket.

• Increased price competition. • Access to a wider range of goods than is currently available within Castlemaine. • Reduced travel requirements and associated environmental benefits.

22


Deep End Services

85 A total of 32 submissions and one late submission were made regarding the exhibited Am C73 and combined Permit Application.

86 A small number of submissions made by local residents were on the basis that Castlemaine does not require a further supermarket and/or that the introduction of another supermarket would not improve prices and the range of goods on offer.

87 All of the economic analysis provided in relation to Am C61, and verified in this statement, demonstrates that Castlemaine does have a significant need for further supermarket floorspace.

88 My experience is that the introduction of a new supermarket in a town which is dominated by one incumbent will have a positive impact on prices and range.

89 I therefore cannot agree with these submissions.

90 The late submission made by Norton Rose Fulbright was on behalf of North West Supermarkets (“NWS”), a company which is associated with the operations of the Castlemaine Maxi SUPA IGA supermarket.

91 Of relevance to me is issue two in the late submission:

“NWS submits that the location of the proposed supermarket away from the Castlemaine town centre will have an adverse effect upon the extent and adequacy of facilities available to the local community as it will reduce economic activity in the town centre.”

92 I disagree with this statement for four reasons.

93 First, the Lascorp site is within the Castlemaine Commercial Centre not “.. away from the Castlemaine town centre …”.

Submissions

23


Deep End Services

94 This was confirmed by the Panel considering Am C61 which recommended that the Castlemaine Commercial Centre boundary be extended to include the former gasworks site to allow for further retail development to cater for Castlemaine’s existing and future retail floorspace needs.

95 Council accepted the recommendation and the map at Clause 21.12-2 (Castlemaine Commercial Centre) in the Scheme clearly shows the former gasworks site is within the boundary.

96 Second, whilst an argument was put to the Am C61 Panel by Mr Angus Witherby – a town planner called by Mr Robert Jolly representing Maddern’s IGA – that a ‘core’ retail area should be identified as the location for “major retail and commercial development” within Castlemaine, this suggestion was not endorsed by the Panel as no strategic work had been done to justify the establishment of such an area.

97 I also note that the lack of adequately sized alternative development sites elsewhere within the Castlemaine Commercial Centre would result in such an exercise being, ultimately, futile if the future retail floorspace needs of Castlemaine are to be adequately addressed.

98 Third, the introduction of the proposed ALDI supermarket will increase, not decrease “… economic activity in the town centre”.

99 Quite simply:

• Retail sales recorded by retailers located within the Castlemaine Commercial Centre will increase by a net $8.3 million (i.e. gross sales of $13.8 million less $5.5 million impact on other retailers within the Centre);

• A range of retailers and service providers in the Centre will record increases in activity as fewer local residents are forced to travel out of the area to access the supermarkets they require; and

• Direct and indirect employment will increase within the Centre.

100 Finally, there is no danger of the successful functioning of the Castlemaine Commercial Centre being threatened by the introduction of the proposed ALDI supermarket.

101 Mr Stephens noted in his statement at 3.22 to the C61 Panel that “… the Castlemaine Commercial Centre is currently trading strongly”.

102 He also commented on the low vacancy rate within the Centre, estimating it to be of the order of 4%, a level which I also observed when I inspected Castlemaine recently.

103 The Castlemaine Maxi SUPA IGA supermarket will experience the largest impact due to the opening of the proposed ALDI.

104 However, this supermarket will, in my opinion, continue to trade strongly and form part of an expanded supermarket base from which local shoppers will be able to choose.

105 For these four reasons, I therefore cannot agree with the second issue raised in NWS’ late submission to Am C73.

24


Deep End Services

106 Am C73 and the combined Permit Application will allow for the development of a new 1,500 sqm supermarket in Castlemaine.

107 The supermarket – assumed to be ALDI – would be developed on a site which has been endorsed for such development in recent strategic work undertaken by Council.

108 Castlemaine has a remarkable level of undersupply of supermarket floorspace and the proposed development will only go some way to addressing this undersupply.

109 Other benefits to the local community will include increased price competition, greater choice, reduced travel requirements and more employment.

110 Impacts on other retailers – mitigated by a significant contribution from reduced escape expenditure – will be largely focussed on the successful existing major supermarket within the Castlemaine Commercial Centre and the viability of the Centre will, in no way, be threatened.

111 I conclude, therefore, that the proposed development will deliver a substantial positive net community benefit.

Conclusion

25


Deep End Services

112 In arriving at my conclusion, I have made all the inquiries that I believe are desirable and appropriate and no matters of significance which I regard as relevant have, to my knowledge, been withheld from the Panel.

JUSTIN GANLY Managing Director, Deep End Services 21 April 2017

26


Deep End Services

Appendix A Curriculum vitae for Justin Ganly

Managing Director, Deep End Services Pty Ltd

Associate Director, KMPG February 1999 – June 2003

National Real Estate Analyst, Coles Myer January 1998 – February 1999

Managing Consultant, Coopers & Lybrand Consultants August 1993 – December 1997

Senior Consultant, Andersen Consulting January 1990 – July 1993

Graduate Diploma of Applied Finance and Investment

Securities Institute of Australia, 2003

Bachelor of Chemical Engineering (First Class Honours)

University of Melbourne, 1989

Board Member, MAB Corporation Advisory Board

Member, Property Council of Australia

Associate Member, Large Format Retail Association

Member, Victorian Planning & Environmental Law Association

Member, Urban Land Institute

• Experienced economic expert • Well developed modelling and forecasting skills • Clear and thorough communicator in both written and verbal presentations • Experience in dealing with all major retailers in Australia and New Zealand • Detailed knowledge of all major property classes within Australia and New

Zealand • Developing knowledge of markets in Asia, USA and the Middle East • Well known in the business community via involvement with clients and through

regular commentary in publications such as the Australian Financial Review, The Australian, The Age and the Sydney Morning Herald

Current Position

Previous Positions

Academic Qualifications

Professional Affiliations:

Skills / Attributes:

27


Deep End Services

Managing Director, Deep End Services (July 2003 – current)

• Justin established Deep End Services in July 2003 and now employs thirteen staff based in Melbourne and one based in Sydney

• Deep assists clients with a common requirement - the need to quantify the effects of the location of their business or property on sales, profitability, growth and income. “DEEP” represents three core service areas: • Demand Evaluation • Economics • Planning

• Within each of these three areas, Deep End Services provides consulting advice to retailers, property owners, property developers and others such as financial institutions, infrastructure providers and industry associations. The products offered included: • Store network planning and sales forecasting • Acquisition due diligence • Feasibility analysis • Economic impact assessment

• Deep’s property clients include: • AMP, Australand, Axiom Properties, Brookfield Multiplex, Cbus Property,

Charter Hall Retail REIT, Dennis Family Corporation, Harvey Norman, ISPT, Lend Lease, MAB Corporation, Macquarie Bank, Mirvac, Orica, Pellicano, Places Victoria, Stockland, Vicinity Centres, Villawood, Walker Corporation and Westfield

• Deep’s retail clients include: • ALDI, Anaconda, Baby Bunting, Beacon Lighting, Clark Rubber, Coles,

Costco, Gazal Group, Harris Scarfe, Noni B, Officeworks, Oroton, Petbarn, Pillow Talk, Spotlight, The Good Guys and Woolworths

• Deep’s other clients include: • Archer Capital, InterContinental Hotels Group, KPMG, Large Format Retail

Association, Medibank Private, Melbourne Racing Club, Newcastle Permanent Building Society, NSW Department of Planning & Environment and Reading Entertainment

Professional Experience:

28


Deep End Services

Associate Director, KPMG (February 1999 - 2003)

• Based in Melbourne, but working on assignments throughout Australia and New Zealand, Justin worked closely with Bernard Salt, Australia’s leading business demographer, to provide consulting services to clients requiring independent assistance on retail, property, demand and/or demographic issues.

• Services and clients at KPMG and Coopers & Lybrand Consultants included: • Planning & litigation support (AMP, Coles, Myer, Macquarie CountryWide) • Shopping centre development (AMP, Gandel, Leda, Macquarie

CountryWide) • New location feasibility studies (Bunnings, Melbourne Museum, Reading

Cinemas) • Store location network strategies (Freedom Furniture, Barbeques Galore,

Rebel Sport) • Demand analysis (Strandbags, Just Jeans, Jeans West) • Specialty store micro-siting (Australia Post, Terry White, Strandbags).

National Real Estate Analyst, Coles Myer (January 1998 - 1999)

• Employed as Coles Myers’ National Estate Analyst in a position within the Shared Services team based at Tooronga in Melbourne.

• The key responsibilities in this position were the development of store sales forecasting models for all major Coles Myer brands (including Myer Grace Bros, Kmart, Target, Coles and Bi-Lo) plus delivery of sales forecasts for proposed new or refurbished stores for use in capital allocation decisions.

Managing Consultant, Coopers & Lybrand Consultants (August 1993 - December 1997)

• Employed as a Managing Consultant in C&LC’s Property Group, which comprised up to 40 staff located in offices in Melbourne, Sydney, Brisbane, Adelaide and Canberra.

• The Melbourne operation was responsible for providing consulting advice to clients involved in retail, property ownership and property development in Australia, New Zealand and South East Asia. This group transferred to KPMG in early 1998.

Senior Consultant, Andersen Consulting (January 1990 - 1993)

• Employed as a Senior Consultant in the Systems Integration Group in the Melbourne office and was involved in systems installation such as the design and installation of a retail property management system in Auckland.

Professional Experience Cont’: