Economic Expert Witness Statement - Amendment C73 to the Mount Alexander Planning Scheme and combined Planning Permit Application PA072/2013 ...
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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 justin.ganly@deependservices.com.au 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.
Contents
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
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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
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Introduction
1.1 Background 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.
1.2 Approach 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.
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1.3 Abbreviations 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
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1.4 Expert The following expert witness details are provided as required in Planning Panels
witness details 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.
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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.
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• 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.
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Am C73 & Planning Permit Application C072/2013
2.1 Purpose 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.
2.2 Am C73 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.
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Figure 1—Am C73
site boundary
Source: Am C73
Explanatory Report
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.
2.3 Permit 16 The Permit Application is to allow for:
Application • The development of buildings and works to facilitate the operations of a 1,500
C072/2013 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.
2.4 Exhibition 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.
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Strategic review – Am C61
3.1 Background 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.
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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:
Figure 2—Proposed
Castlemaine
Commercial Centre
Boundary Map
Source: CCCS
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”
3.2 Panel hearing 25 The C61 Panel hearing took place in Castlemaine during the week commencing 2
and report 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.
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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.
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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.
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3.3 Implementati 37 Changes to the Scheme implemented via Am C61 were gazetted on 28 April 2016.
on 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:
Figure 3—Adopted
Castlemaine
Commercial Centre
Boundary Map
Source: Mount
Alexander Planning
Scheme
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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
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Need and economic impact
4.1 Introduction 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.
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4.2 Catchment Definition
area 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).
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Population
50 The historical and forecast population of the catchment area is set out in the table
below.
Table 1—
Sector 2006 2011 2016 2020 2026
Catchment area
population, 2006- Primary 9,033 9,305 9,774 10,033 10,493
2026
Secondary 8,271 8,567 8,723 8,863 9,067
Source: Deep End Total catchment area 17,304 17,872 18,497 18,896 19,560
Services; ABS;
Average change - 0.6% 0.7% 0.5% 0.6%
Victoria in Future
(%pa)
2016
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:
Table 2—
Sector 2011 2016 2020 2026
Catchment area
Food, Groceries & Primary $54.2m $62.8m $72.1m $90.2m
Liquor spending,
Secondary $49.0m $56.6m $65.2m $81.1m
2011-2026
Total catchment area $103.2m $119.4m $137.3m $171.3m
Source: Deep End
Average change (%pa) - 3.0% 3.6% 3.8%
Services; Deloitte
Access Economics;
MarketInfo 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.
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4.3 Need 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.
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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 Supermarket No. of Largest supermarket Total supermarket Supermarket
population brands supermarkets floorspace floorspace provision
(C = Coles (using township
WW = Woolworths population)
FW = FoodWorks)
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 8,751 - - - 7,610 sqm 0.87 sqm/capita
Castlemaine
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.
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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).
4.4 Economic Sales forecast
impact 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.
Table 4—Sales
FG&L Non-FG&L Total
forecast for
Castlemaine ALDI, Sector Market size Market share Sales Sales Sales
2019/20 (@20%)
Source: Deep End Primary $72.1m 7.2% $5.2m - -
Services Secondary $65.2m 6.0% $3.9m - -
Sub-total $137.3m 6.6% $9.1m - -
catchment
Beyond catchment - - $2.0m - -
(@18%)
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).
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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.
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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.
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Submissions
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 …”.
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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.
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Conclusion
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.
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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
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Appendix A Curriculum vitae for Justin Ganly
Current Position Managing Director, Deep End Services Pty Ltd
Previous Associate Director, KMPG
Positions 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
Academic Graduate Diploma of Applied Finance and Investment
Qualifications
Securities Institute of Australia, 2003
Bachelor of Chemical Engineering (First Class Honours)
University of Melbourne, 1989
Professional Board Member, MAB Corporation Advisory Board
Affiliations:
Member, Property Council of Australia
Associate Member, Large Format Retail Association
Member, Victorian Planning & Environmental Law Association
Member, Urban Land Institute
Skills / • Experienced economic expert
Attributes: • 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
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Professional Managing Director, Deep End Services (July 2003 – current)
Experience:
• 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
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Professional Associate Director, KPMG (February 1999 - 2003)
Experience Cont’:
• 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.
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