DFO Jindalee

Market review and sales potential

September 2015

MacroPlan Dimasi

MELBOURNE SYDNEY Level 4 Level 4 356 Collins Street 39 Martin Place Melbourne VIC 3000 Sydney NSW 2000 (03) 9600 0500 (02) 9221 5211 BRISBANE GOLD COAST Level 15 Level 2 111 Eagle Street 89 -91 Surf Parade Brisbane QLD 4000 Broadbeach QLD 4218 (07) 3221 8166 (07) 3221 8166 ADELAIDE PERTH Ground Floor Level 1 89 King William Street 89 St Georges Terrace Adelaide SA 5000 Perth WA 6000 (08) 8221 6332 (08) 9225 7200

Prepared for: Riva Ridge Pty Ltd

MacroPlan Dimasi staff responsible for this report:

Tony Dimasi, Managing Director – Retail James Turnbull, Senior Manager – Retail Adelaide Timbrell, Analyst

Table of contents

Executive summary i

Introduction v

Section 1: Outlet centres: Key success factors 1

1.1 History of outlet centre retail 1

1.2 Australian outlet centre experience 2

1.3 Key success criteria 3

Section 2: Centre location, composition and performance 7

2.1 Location and context 7

2.2 Centre composition and trading performance 10

2.3 Recent historical performance 12

Section 3: Trade area analysis 13

3.1 Trade area definition 13

3.2 Trade area population 17

3.3 Socio-demographic profile 21

3.4 Retail expenditure 24

Section 4: Competitive framework 31

4.1 Outlet retail centres 31

4.2 Traditional retail shopping centres 33

Section 5: DFO Jindalee future outlook 35

5.1 Recent retail trends 35

5.2 Current market share and base sales potential 36

Executive summary

This report provides an assessment of the market served by DFO Jindalee and a high level analysis of the sales and expansion potential for the centre. The following key points summarise our analysis:

• DFO Jindalee is a factory outlet centre located in south-western Brisbane, collocated with the Jindalee Home large format retail centre, which together create a substantial retail precinct with around 40,000 sq.m of retail and ancillary floorspace.

• DFO Jindalee occupies a very prominent position on the Centenary Highway, at the Sinnamon Road turn off, which provides convenient access to the south-western suburbs of Brisbane including the growing Greater Springfield and Ripley Valley growth areas, as well as Ipswich.

Centre composition & performance

• DFO Jindalee contains 16,485 sq.m of gross lettable area (GLA), and included 13,829 sq.m of retail GLA as at June 2015. Since 2011, DFO Jindalee has improved considerably, with tenancy improvements including the introduction of Nike, Adidas, and Kathmandu, which together have strengthened enormously the northern end of the centre’s main mall.

• Furthermore, a development application has been submitted to Brisbane City Council for an expansion of the centre of around 2,500 – 3,000 sq.m, which would entail the reconfiguration of existing tenancies as well as 6 new tenancies in a new mall to the east of the centre. We understand that a decision regarding this application is imminent.

• DFO Jindalee achieved growth in annual sales of 25% over the period 2011 - 2015, in spite of major expansions at Mount Ommaney SC in 2011/12, and Indooroopilly in 2014/15. Sales increased from $35.9 million to $44.8 million (ex GST), between 2011 and 2015, partly due to an increase in floorspace but also due to improvements in sales per sq.m, as a result of the improved tenant mix.

DFO Jindalee i Market review and sales potential Executive summary

• Annual gross rent paid by retailers at DFO Jindalee totalled $4.3 million for the year to July 2015, at an average rate of $338 per sq.m, with an addition $0.6 million in gross rent generated from the Goodlife Health Club.

Trade area

• DFO Jindalee serves a trade area consisting of a large primary sector, two secondary sectors and a tertiary sector, generally including much of south-west Brisbane and Ipswich. The total trade area population served by DFO Jindalee is estimated at 488,400 in 2015, including some 379,100 residents in the main trade area and close to 198,000 residents in the primary sector.

• Massive future population growth is expected to occur in both of the secondary sectors, with the secondary south including the ongoing growth in the Greater Springfield area and the secondary north sector undergoing massive urban renewal.

• The total trade area population is estimated to increase by almost 50% by 2026, to reach 721,000, reflecting average annual growth of 3.6%. The main trade area population is estimated to grow by 164,500 persons by 2026, an increase of 43%, equivalent to an average annual rate of 3.0%.

• The main trade area population is characterised by high income, a young average age, and is predominantly Australian born but relatively ethnically diverse, as compared with the Brisbane average. The overall level of affluence across the trade area is expected to improve in the future as a new, wealthier population establishes in the major greenfield growth areas and in the inner-city urban renewal areas.

• Total retail expenditure per capita across the main trade area is slightly above the Brisbane average, but notably per capita expenditure on apparel is about 7 – 8% above the Brisbane average.

• The total trade area retail expenditure market is expected to double in size by 2026, from about $6.33 billion in 2015 to $12.8 billion, at an average annual growth rate of 6.6%.

DFO Jindalee ii Market review and sales potential Executive summary

• The total apparel expenditure generated by the total trade area population in 2015 is estimated at $587 million, including $479 million in the main trade area. The apparel expenditure market is expected to grow by around 6.1% per annum, to reach $1.13 billion by 201, including $898 million in the main trade area.

Competition

• DFO Jindalee is focused almost entirely on apparel retailing, therefore, the major competition to the centre comprises other relevant outlet centres and major traditional shopping centres with significant apparel offerings.

• There are no other major factory outlet centres located within south-western Brisbane, with the only other significant outlet centre in Brisbane being DFO Brisbane Airport, located approximately 25 km north-east of DFO Jindalee. There is only one other outlet centre of any significance in South East Queensland, i.e. Harbour Town on the Gold Coast.

• The closest and most relevant regional centres to DFO Jindalee include Indooroopilly SC to the north and Mt Ommaney SC to the south. Both of these centres have undergone major redevelopments over the past 5 years, with Mount Ommaney Centre expanded in 2010 and Indooroopilly more recently, in 2014. In this context, we do not see either centre under-going a major expansion in the foreseeable future.

• Orion Springfield, in the secondary south sector is currently undergoing a major redevelopment, which will see the addition of a Target dds, as well as mini-major and specialty floorspace and a new cinema complex. We expect the majority of impacts from this expansion will be absorbed by traditional sub-regional shopping centres like Mount Ommaney SC, Forest Lake and Redbank Plaza.

DFO Jindalee iii Market review and sales potential Executive summary

Market potential

• The available apparel expenditure accessible to DFO Jindalee is expected to grow very strongly in the future, in aggregate volume terms, driven by the massive future population growth in the region. We consider that there is further upside to the recent sales growth achieved by DFO Jindalee, particularly as its reputation improves and new retailers are introduced to the centre.

• In our estimations DFO Jindalee currently captures about an 11.5% market share of the available apparel expenditure generated by the primary sector population; an estimated 7.7% market share of apparel expenditure of the main trade area; and an estimated market apparel expenditure market share of 6.6% from the total trade area.

• Having regard to estimated growth in the apparel expenditure market across the trade area, and assuming that the centre maintains its market shares, we estimate that the centre could achieve sales in the order of $60 million (ex GST) by 2020.

• We consider there is a good opportunity for DFO Jindalee to achieve total retail sales much higher than the figures detailed above, through an improved tenancy mix, increased levels of occupancy of existing floorspace and assuming that the additional 2,500 – 3,000 sq.m of proposed space is developed and tenanted with retail tenants.

• Assuming the quality of the tenancy mix can continue to be improved, and with a potential expansion of the retail offering, we consider that the centre can achieve an increase in market share, with a sales potential of around 20 – 25% higher than the ‘base case’, i.e. in the order of $73 – 74 million by 2020.

DFO Jindalee iv Market review and sales potential

Introduction

This report provides an assessment of the market served by DFO Jindalee and a high level analysis of the sales and expansion potential for the centre.

The report has been prepared in accordance with instructions from Riva Ridge Pty Ltd, and is structured as follows:

• Section 1 reviews the history and evolution of outlet centres in Australia, includes an overview of key success criteria for outlet centres in Australia, and then details the methodology that we have applied to assess the future potential of DFO Jindalee, based on these factors.

• Section 2 reviews the local and regional context of the subject site, as well as providing a detailed review of the composition and performance of the centre.

• Section 3 examines the trade area served by DFO Jindalee, assessing the current and projected population levels in the trade area; the socio-demographic profile of the trade area population; and the current and future spending levels of the trade area population, with a particular focus on apparel expenditure.

• Section 4 reviews surrounding competitive environment of relevance to DFO Jindalee, including existing and proposed retail facilities of relevance.

• Section 5 builds upon the earlier sections to provide a high level assessment of the sales and market share potential for the centre in the future.

DFO Jindalee v Market review and sales potential

Section 1: Outlet centres: Key success factors

This section of the report reviews the history and evolution of outlet centres in Australia, includes an overview of key success criteria for outlet centres in Australia, and then details the methodology that we have applied to assess the future potential of DFO Jindalee, based on these factors.

1.1 History of outlet centre retail

The initial rationale for the development of outlet centres, and their primary reason for being, was to offer relatively low cost space for retailers to dispose of highly discounted stock which was no longer able/desired to be sold through their traditional (full price) retail outlets.

Because the stock is so highly discounted, and the gross profit margin on such stock is relatively low, the sustainability of the concept depends on retail outlets being able to pay an occupancy cost ratio (i.e. rental as a percentage of sales) which is well below the ratios that are paid in either sub-regional or regional centres – typically between half and two-thirds of such levels.

Historically, outlet centres were typically big box tenancies located outside major cities that targeted price-sensitive shoppers. This model has evolved significantly in Europe and the US over more recent years to meet customer demand for higher quality premium outlet centres.

As a consequence, more recent models of outlet centres feature much higher standards of design, with genuine designer/premium brands extensively represented in the mix, and a focus on dining/recreation, in order to create a destination that is visited for its own sake as much as it is visited for the shopping bargains which it offers.

DFO Jindalee 1 Market review and sales potential Section 1: Outlet centres: Key success factors

1.2 Australian outlet centre experience

The first outlet centre to open in Australia was DFO Moorabbin in 1997, located next to Moorabbin Airport approximately 20 km from the Melbourne CBD. The centre is a typical big box style outlet centre and has been expanded over the years to include a more substantial food court and additional tenancies.

At present in Australia there are some 20 outlet centres of significance, and their sales and rental performance levels vary enormously. DFO Homebush in Sydney sits very clearly at the top, being by far the most successful outlet centre. Harbour Town Gold Coast is also very successful, although it is a ‘hybrid’ centre, containing some traditional retail elements, including a large supermarket and associated convenience shopping, as well as outlet retailing.

The Australian outlet centre offer, in the main, is relatively ‘downmarket’ (i.e. there is no ‘premium outlet’ concept in Australia yet). The key attributes of most of the current outlet centre offers in Australia include:

• Mainly mid-market to lower end fashion: The offer is typically focussed towards mid- market or lower end fashion with a very limited amount of upmarket designer brands, and in many centres, no upmarket brand representation at all. In terms of retailers represented, the offer is also often a replication of what is provided in fashion shopping at typical shopping centres, but with the emphasis on discounted merchandise.

• Big Box: Factory outlet centres are built as low cost big box ‘warehouses’, in large enclosed buildings with no design features and minimal finishes to shop fronts.

• Minimal dining: Most centres include a limited provision of basic ‘foodcourt’ eating options, with few or no restaurants.

DFO Jindalee 2 Market review and sales potential Section 1: Outlet centres: Key success factors

DFO Homebush in western Sydney is by far the strongest performing outlet centre in Australia, reporting sales of $273 million (inc. GST) for year 2014. Indeed, the performance of this centre is also arguably constrained by the popularity of the centre, which means that it is difficult to access at peak times on the weekends.

The centre is located 14 km west of Sydney CBD and was originally built partially as an outlet centre and partly as a homemaker centre. It has recently undergone expansion to include a number of genuinely premium designer stores – Armani Outlet, Ermenegildo Zegna, Escada, Hugo Boss, Max Mara, Burberry, Calvin Klein, Brooks Brothers, Coach Factory and Michael Kors. The redevelopment increased outlet floorspace to around 20,000 sq.m, and also added an improved food catering offer at the centre.

Similar to DFO Homebush, DFO Jindalee is co-located with a bulky goods/homemaker retail offer. In fact, the homemaker offer around DFO Jindalee is a much more significant offer than the ground floor homemaker component at DFO Homebush.

Jindalee Home, located to the immediate south of the DFO Jindalee adds to the critical mass of attraction of this precinct and includes major tenants like Nick Scali, Freedom Furniture, Coles and Pet Barn.

1.3 Key success criteria

Over recent years, MacroPlan Dimasi has conducted numerous investigations of outlet centres across Australia, having reviewed most of the existing centres in Australia, as well as broad studies of the outlet centre industry in general.

On the basis of these studies, we have drawn the following conclusions, which can be considered a summary of the key success criteria and benchmark performance levels for the industry:

• The total outlet centre industry in Australia comprises about 20 centres, which generate a combined turnover estimated at $1.5 billion, with an average trading level of $5,000 - $6,000 per sq.m, and an average turnover volume per centre of $90 – $100 million. Sales

DFO Jindalee 3 Market review and sales potential Section 1: Outlet centres: Key success factors

volumes per centre range from less than $40 million up to $270 million (at DFO Homebush), with seven centres achieving sales over $100 million.

• The outlet centre industry in Australia is therefore still relatively small, and accounts for only about 1% – 1.5% of total non-food retail sales in the country. In the USA, outlet malls account for approximately twice the market share of non-food retail sales which the sector achieves in Australia (i.e. 2.5 - 3.0%).

• The key lesson, in our view, which can be learnt from the experience to date of outlet centre development in Australia, is that an outlet centre can only expect to succeed if it has good access to a very large main trade area population. Outlet centres draw business thinly across broad regions, i.e. they attract a low market share of available expenditure and, therefore, require an extensive area from which to draw such a market share in order to generate a large enough sales volume to sustain the necessary critical mass of stores.

Two basic factors contribute to the low market shares of total available expenditure typically achieved by outlet centres, namely:

- First, apart from a limited provision of food catering stores, outlet centres are almost entirely focused on non-food retail expenditure, which accounts for only about half of total retail expenditure.

- Second, within the total non-food categories, outlet centres operate almost exclusively in the apparel segments, which typically generate 80-90% of total centre sales. Apparel expenditure, defined to include clothing and footwear (including sporting apparel), fashion accessories and jewellery, generally accounts for 25%-30% of total non-food retail expenditure, or 10%-15% of all retail expenditure. Therefore, outlet centres are shooting for a rather small target. The chart below summarises this point.

Competition for such expenditure comes from CBD’s, regional centres, sub-regional centres and larger strips, including department stores, discount department stores, apparel mini-majors and apparel specialty stores at all of these centres. Therefore,

DFO Jindalee 4 Market review and sales potential Section 1: Outlet centres: Key success factors

outlet centres can only achieve low market shares of total available retail expenditure across any region.

As a result, the most important requirement for a successful centre, in our view, is good accessibility to an extensive regional population, translating to a large apparel expenditure pool. There are other essential requirements, discussed further below, but this first one is the most important.

Our analysis of trade areas served by Australia’s outlet centres indicates that for a truly successful outlet centre a main trade area population of 300,000 is required, and that a greater level, say 400,000 plus, is highly desirable.

Chart 1.1

Total Australian Retail Turnover, 2014 ($ billion)

Department stores² $7.2b 2% Other retailing $38.8b 14%

Apparel¹ $32.1b Food, liquor and groceries 12% $113.4b 41%

Food catering $38.7b 14%

Household goods $46.3b 17%

¹Assumes that Apparel includes clothing, footwear and personal accessory retailing, as well as 60% of department store retailling. ²Assumes that Department stores turnover excluding apparel is equivalent to 40% of trade Source: ABS Retail Trade, Australia and MacroPlan Dimasi

DFO Jindalee 5 Market review and sales potential Section 1: Outlet centres: Key success factors

Critical mass is the next requisite feature of successful outlet centres. DFO Homebush, DFO Essendon, DFO Brisbane Airport, Harbour Town Perth and Harbour Town Gold Coast, are the most successful outlet centres, and are also generally among the largest, each being at least 17,000 sq.m in size.

Critical mass is necessary to ensure the centre can achieve a reasonable market share of the available expenditure pool – because outlet centres draw thinly across large areas, it follows that a ‘small’ outlet centre is highly likely to trade poorly. However while critical mass is highly desirable in successful outlet centres, it is not of itself a factor which guarantees success. There are a number of examples of large outlet centres which trade either moderately or poorly.

Accessibility is the third key element required for a successful outlet centre. If such a centre needs to draw business from an extensive region, then it must be reasonably accessible to the residents of such a broad region.

What has also now emerged in regards to the outlet centres industry in Australia is that branding is fundamental, both for the centre itself and, increasingly, for the retailers which are represented. Outlet centres that are ill considered, or that have been put together by small, inexperienced operators, have generally floundered. Examples of this include Brands on Sale at Campbelltown and the Brand Smart Outlet Centre in the Parramatta CBD, which closed more than 5 years ago.

As detailed in the remainder of this report, the DFO Jindalee site meets all of the criteria required for a successful outlet centre, except that it is currently at the mid-lower end of the spectrum in terms of total size.

DFO Jindalee 6 Market review and sales potential

Section 2: Centre location, composition and performance

This section of the report reviews the local and regional context of the subject site, as well as providing a detailed review of the composition and performance of the centre.

2.1 Location and context

The suburb of Jindalee is located approximately 12 km south-west of the Brisbane CBD, a short distance south of the Brisbane River. The Centenary Highway is the main traffic route through the region which connects the inner-western suburbs of Toowong and Indooroopilly, with the Ipswich Motorway and continues south to the rapidly growing Greater Springfield region and Ripley Valley. Map 2.1 shows the location of DFO Jindalee within the context of the Brisbane metropolitan area.

DFO Jindalee is located at the intersection of Amazons Place and Sinnamon Road, immediately occupying a prominent position fronting the Centenary Highway, while Seventeen Mile Rocks Road provides direct access to the centre for residents to the south- east around Oxley. The centre is, therefore, easily accessible from a broad surrounding region in south-western Brisbane.

Map 2.2 illustrates the key features of the local area. The centre is collocated with Jindalee Home, a hybrid retail asset which predominantly consists of homemaker/large format retail, but also includes the Coles anchored neighbourhood shopping centre, previously called Jindalee Village. Major national brand tenants include Barbeques Galore, Forty Winks, Freedom, Nick Scali, Beacon Lighting and Snooze.

Together these retail centres form a key retail destination in the region, serving both local and broader area residents. The retail offers of the centres generally tend to complement one another, offering substantial cross-shopping opportunities for their respective customers.

DFO Jindalee 7 Market review and sales potential

Map 2.1: DFO Jindalee

Regional context

Map 2.2: DFO Jindalee Site location Section 2: Centre location, composition and performance

2.2 Centre composition and trading performance

DFO Jindalee is laid out in a racetrack design. The centre has recently undergone an upgrade which saw the replacement of the poorly performing food court with a strongly performing Nike store. Adidas and Kathmandu have also replaced a number of smaller tenancies in the northern part of the centre and an additional four leases have also been executed in the past two months.

Furthermore, a development application has been submitted to Brisbane City Council for an expansion of the centre of around 2,500 – 3,000 sq.m, which would entail the reconfiguration of existing tenancies as well as 6 new tenancies in a new mall to the east of the centre. We understand that a decision regarding this application is imminent.

Table 2.1 following summarises the current composition of DFO Jindalee, as well as its trading and rental performance for the year ended July 2015. Key points to note are as follows:

• DFO Jindalee contains 16,485 sq.m of gross lettable area (GLA), including 13,829 sq.m of retail GLA, which places the centre at the small to medium end of the spectrum for factory outlet centres in Australia.

• Total reported retail sales at the centre were $44.8 million (ex GST) for the year to June 2015, an increase of about 9.5% compared with 2013. (NB: This includes sales for tenants that have now left the centre).

• These sales consisted of $12.1 million from the 7 mini-major tenants; $24.2 million in apparel specialty sales; $5.7 million from the remaining specialty stores; and around $2.7 million for tenants that previously traded at the centre (e.g. Supre).

• Specialty sales productivity levels averaged $3,216 per sq.m and mini-major tenants averaged $3,838 per sq.m.

DFO Jindalee 10 Market review and sales potential Section 2: Centre location, composition and performance

• Although, only consisting of a small amount of floorspace, sales productivity levels achieved by food catering tenants were strongest, at $9,474 per sq.m.

• Annual gross rent paid by retailers currently at DFO Jindalee (i.e. excluding Supre) totals $4.3 million, at an average rate of $338 per sq.m gross.

• The average gross rents for specialty retailers was $342 per sq.m, equivalent to an average occupancy cost ratio of 10.6%.

• A further $583,000 in gross rental income is generated by the non-retail tenants, primarily driven by the Goodlife Health Clubs gym.

Table 2.1 DFO Jindalee - Composition & performance*

GLA Sales** Gross rent Occ cost Category (sq.m) ($'000) ($/sq.m) ($'000) ($/sq.m) ratio

Mini-majors*** 3,164 12,142 3,838 1,044 330 8.6%

Retail specialties Food catering 249 2,359 9,474 254 1,021 10.8% Apparel 7,634 24,240 3,175 2,439 320 10.1% Household 914 1,435 1,570 240 262 16.7% Leisure 266 960 3,608 96 362 10.0% General 248 955 3,851 153 615 16.0% Total retail spec. 9,311 29,948 3,216 3,182 342 10.6% Accountant 237 85 359 Storage 47 4 79 Shop 39 (ex. Supre - now leased)*** 501 Vacant 569 Other sales recorded to July 2015***** n.a. 2,700 n.a.

Total centre - retail 13,829 44,791 n.a. 4,315 338 n.a. Goodlife Health Clubs 2,656 583 220

Total centre 16,485 4,898 297

*For the year ended July 2015 ** Exclusive of GST ***i.e. Tenants greater than 400 sq.m. **** Leased post July 2015 ***** Previous tenants that traded through part of year to July 2015. No GLA has been recorded against these sales. Source: Australian Unity; MacroPlan Dimasi

DFO Jindalee 11 Market review and sales potential Section 2: Centre location, composition and performance

2.3 Recent historical performance

The DFO Jindalee asset has previously been reviewed by MacroPlan Dimasi in May 2011 and again in October 2013. Since 2011, the asset has improved considerably, with tenancy improvements including the introduction of Nike, Adidas, and Kathmandu, which together have strengthened enormously the northern end of the centre’s main mall.

Other tenancy mix improvements have occurred throughout the rest of the centre, and the level of vacant space has been substantially reduced as a result, from more than 1,300 sq.m in February 2011 to 569 sq.m as at July 2015.

One of the most promising signs for the future potential of the centre has been the continued growth in annual sales over the period 2011 - 2015, in spite of major expansions at Mount Ommaney SC in 2011/12, and Indooroopilly in 2014/15. Indeed sales increased by 25%, from $35.9 million to $44.8 million, between 2011 and 2015, partly due to an increase in tenanted floorspace but also the result in improvements in sales per sq.m.

DFO Jindalee 12 Market review and sales potential

Section 3: Trade area analysis

This section of the report examines the trade area served by DFO Jindalee, assessing the current and projected population levels in the trade area; the socio-demographic profile of the trade area population; and the current and future spending levels of the trade area population, with a particular focus on apparel expenditure.

3.1 Trade area definition

The extent of the trade area or catchment that is served by any shopping centre or retail facility is shaped by the interplay of a number of critical factors. These factors include:

• The relative attraction of the centre, in comparison with alternative competitive retail facilities. The factors that determine the strength and attraction of any particular centre are primarily its scale and composition (in particular the major trader or traders that anchor the centre); its layout and ambience; and carparking, including access and ease of use.

• The proximity and attractiveness of competitive retail centres. The locations, compositions, quality and scale of competitive retail facilities all serve to define the extent of the trade area which a shopping centre is effectively able to serve.

• The available road network and public transport infrastructure, which determine the ease (or difficulty) with which customers are able to access a shopping centre.

• Significant physical barriers which are difficult to negotiate, and can act as delineating boundaries to the trade area served by an individual shopping centre.

DFO Jindalee 13 Market review and sales potential Section 3: Trade area analysis

The trade area estimated to be served by DFO Jindalee has been defined taking into consideration all of the above factors, and includes one primary sector and two secondary sectors, illustrated on Map 3.1 and described as follows:

• The primary sector extends approximately 5 km north and 10 km east, south and west of the centre. The sector is bounded by the Beenleigh/Gold Coast railway line to the east and extends south to the Logan Motorway

• The secondary north sector extends west to Ipswich Road and includes the inner Brisbane suburbs of Auchenflower, Toowong, Taringa, St Lucia, Indooroopilly, West End, South Brisbane, Highgate Hill, Dutton Park, Fairfield and Yeronga.

• The secondary south sector contains the suburbs of Goodna, Redbank, Redbank Plains, Camira, Collingwood Park as well as the developing suburbs around Springfield.

• The tertiary sector extends some 30 km west of Jindalee and encompasses Ipswich, as well as the surrounding suburbs within a 10 km radius.

The combined primary and secondary sectors are referred to the main trade area throughout this report, from which typical factory outlet centres draw 70 - 80% of their sales. The main trade area and tertiary sector combined are referred to as the total trade area.

Map 3.2 highlights the key access routes trade area residents use to visit the centre, and also provides 20 and 30 minute drive times around the centre.

The location of DFO Jindalee on the Centenary Highway ensures the centre is readily accessible from a broad surrounding region of south-western Brisbane. Access from the secondary north sector is provided via the Western Highway; while residents of the secondary south sector enjoy good access to DFO Jindalee via the convergence of the Centenary Highway, Logan and Ipswich Motorways. Access from the tertiary sector is also relatively straightforward via Warrego Highway, Cunningham Highway and Brisbane Road.

It is also worth highlighting that the majority of the main trade area of DFO Jindalee is located within a 20 minute drive time of the centre, while the entire total trade area is located within a drive time of 30 minutes. Given the destinational nature of outlet shopping, this is considered reasonable in terms of travel times to the centre.

DFO Jindalee 14 Market review and sales potential

Map 3.1: DFO Jindalee

Trade area and competition

Map 3.2: DFO Jindalee

Drivetimes (20 and 30min) Section 3: Trade area analysis

3.2 Trade area population

Table 3.1 details the current and projected population levels within the trade area. This information has been collected from a range of sources, including the following:

• Australian Bureau of Statistics (ABS) Census of Population and Housing (2006 and 2011);

• ABS Dwelling Approvals Data (2010–14);

• ABS Estimated Residential Population Data (ERP) (2011-14);

• Queensland Department of Treasury Population Information and Forecasting Unit (PIFU); and

• Other investigations of future residential development, undertaken by this office.

The total trade area population is estimated at 488,400 in 2015, including some 379,100 residents in the main trade area and close to 198,000 residents in the primary sector. Over the most recent intercensal period (2006-2011), the total trade area population increased at an average rate of 2.6% per annum, or around 12,000 residents per annum, and the main trade area increased at an average rate of 2.8% per annum.

While this trade area population is at the lower end of the range typically served by successful outlet centres in Australia, it is certainly, in our opinion, sufficient to sustain an outlet centre such as DFO Jindalee which is easily accessible, particularly given the massive growth expected to occur in the trade area over the next 10 – 15 years.

Massive future population growth is expected to occur in both of the secondary sectors, with the secondary south including the ongoing growth in the Greater Springfield area and the secondary north sector undergoing a massive transformation, with a number of very significant high density residential developments currently under construction or proposed around Toowong, Milton, West End and Woolloongabba.

DFO Jindalee 17 Market review and sales potential Section 3: Trade area analysis

Table 3.1 DFO Jindalee trade area population, 2006-2026*

Estimated population Forecast population Trade area sector 2006 2011 2015 2018 2021 2026

Primary 168,590 183,750 197,950 205,450 213,700 227,450

Secondary sectors • North 76,040 85,130 93,130 103,630 117,130 142,130 • South 52,040 71,240 88,040 112,040 139,040 174,040 Total secondary 128,080 156,370 181,170 215,670 256,170 316,170

Main trade area 296,670 340,120 379,120 421,120 469,870 543,620

Tertiary sector 89,750 100,310 109,310 123,410 139,910 177,410

Total trade area 386,420 440,430 488,430 544,530 609,780 721,030

Average annual growth (no.) Trade area sector 2006-11 2011-15 2015-18 2018-21 2021-26

Primary 3,032 3,550 2,500 2,750 2,750

Secondary sectors • North 1,818 2,000 3,500 4,500 5,000 • South 3,840 4,200 8,000 9,000 7,000 Total secondary 5,658 6,200 11,500 13,500 12,000

Main trade area 8,690 9,750 14,000 16,250 14,750

Tertiary sector 2,112 2,250 4,500 5,500 7,500

Total trade area 10,802 12,000 18,500 21,750 22,250

Average annual growth (%) Trade area sector 2006-11 2011-15 2015-18 2018-21 2021-26

Primary 1.7% 1.9% 1.2% 1.3% 1.3%

Secondary sectors • North 2.3% 2.3% 3.6% 4.2% 3.9% • South 6.5% 5.4% 8.4% 7.5% 4.6% Total secondary 4.1% 3.7% 6.0% 5.9% 4.3%

Main trade area 2.8% 2.8% 3.6% 3.7% 3.0% Tertiary sector 2.2% 2.2% 4.1% 4.3% 4.9%

Total trade area 2.7% 2.6% 3.7% 3.8% 3.4%

*As at June Source: ABS Census 2011; QLD Office of Economic and Statistical Research; MacroPlan Dimasi

DFO Jindalee 18 Market review and sales potential Section 3: Trade area analysis

The major residential developments in the trade area are summarised as follows and major growth areas are outlined on Map 3.3:

• Greater Springfield (secondary south): is planned to accommodate in excess of 100,000 persons in the future, once fully developed. Major estates include: Springfield Lakes by Lend Lease (up to 10,000 dwellings); Spring Mountain (4,000 dwellings); Springview Estate (2,000 – 2,500 dwellings); Brentwood and Brentwood Forest (1,600 dwellings); and Mountview Estate by Devine (1,400 dwellings).

• Toowong/Milton (secondary north): which is undergoing significant gentrification, with significant increases in residential densities, particularly between the corridor from Toowong Village to the northern parts of Milton, between Coronation Drive and Milton Road.

• West End/Woolloongabba/Yeerongpilly (secondary north): are also undergoing significant urban renewal with more than 10,000 potential dwellings identified in the pipeline in these areas. Major projects include: Yeerongpilly Green (in excess of 1,100 dwellings); Kurilpa Point (more than 11,000 residents).

• Ripley Valley (tertiary sector): is the major greenfield release area west of Greater Springfield which is expected to accommodate in excess of 120,000 persons and has already begun to accommodate new residential development. Major estates include: Amex Corporation’s Providence estate (up to 7,000 homes); Stockland’s Sovereign Pocket/Grampian Hills (more than 2,000 dwellings).

Having regard to the above, the total trade area population is estimated to increase by almost 50% by 2026, to reach 721,000, reflecting average annual growth of 3.6%. The main trade area population is estimated to grow by 164,500 persons by 2026, an increase of 43%, and equivalent to an average annual rate of 3.0%.

In summary, the analysis of future population growth highlights the excellent future potential for DFO Jindalee.

DFO Jindalee 19 Market review and sales potential

Map 3.3: DFO Jindalee

Major growth areas Section 3: Trade area analysis

3.3 Socio-demographic profile

Table 3.2 illustrates the socio-demographic profile of the total trade area population, compared with benchmarks for metropolitan Brisbane and Australia, based on data sourced from the 2011 ABS Census of Population and Housing, with the key highlights as follows:

• Overall, the population available to DFO Jindalee is relatively affluent compared with the metropolitan Brisbane average. The population of the primary (6.7%) and secondary north sectors (26.1%), in particular, enjoy income levels which are well above average. While incomes in the secondary south sector, and indeed, the tertiary sector, are below average, these areas are undergoing rapid change and much of the new population establishing in new Greenfield residential areas is much more affluent than the existing residential population in areas like Collingwood Park, Redbank and Ipswich etc.

• The age profile of the population of each of the trade area sectors varies, with an age distribution broadly comparable with overall Brisbane averages in the primary sector; a population heavily skewed to 20–29 year olds (reflecting the high numbers of young professional couples and singles) in the secondary north sector; and a population very much skewed towards young families in the growing secondary south sector (i.e. low proportion of persons aged over 50 and a very high proportion of children).

• The proportion of home ownership, broadly, across the total trade area population (61.4%) is slightly below the Brisbane average (65.5%). However there is a higher than average level of home ownership in the primary sector and below average home ownership levels within the secondary sectors, particularly the secondary north sector (due to the high proportion of young, working professionals).

• The proportion of Australian born residents in the main trade area residents (66.2%), is significantly lower than the Brisbane average of 73.9%. This is driven by reflects the high proportion of Asian born residents in the primary sector (11.6%) and secondary north sector (16.4%), compared with the Brisbane average and higher than average share of New Zealanders/Pacific Islanders in the secondary south sector (16%).

DFO Jindalee 21 Market review and sales potential Section 3: Trade area analysis

• The proportion of traditional family households (i.e. households with parents and dependent children) across the main trade area and total trade area, in aggregate, is comparable with the Brisbane average, however there are major variations within each of the main trade area sectors. The primary and secondary south sectors contain very high proportions of traditional families; the secondary north sector consists of a high proportion of lone person and couple households, which is typical of an inner-city population.

The main trade area population is characterised by high income, a young average age, and is predominantly Australian born but relatively ethnically diverse, as compared with the Brisbane average.

DFO Jindalee 22 Market review and sales potential Section 3: Trade area analysis

Table 3.2 DFO Jindalee main trade area - socio-demographic profile, 2011

Primary Secondary sectors Main Tertiary Total Bris Metro Aust. Census item sector North South TA sector TA avg. avg.

Per capita income $37,805 $44,662 $28,984 $37,673 $29,309 $35,768 $35,420 $34,467 Var. from Bris Metro benchmark 6.7% 26.1% -18.2% 6.4% -17.3% 1.0% Avg. household income $107,379 $103,081 $86,378 $102,115 $77,717 $96,463 $95,634 $88,205 Var. from Bris Metro benchmark 12.3% 7.8% -9.7% 6.8% -18.7% 0.9% Avg. household size 2.8 2.3 3.0 2.7 2.7 2.7 2.7 2.6

Age distribution (% of population) Aged 0-14 20.9% 11.4% 26.6% 19.7% 22.3% 20.3% 20.1% 19.3% Aged 15-19 7.3% 8.1% 7.5% 7.6% 7.5% 7.5% 6.9% 6.5% Aged 20-29 13.2% 30.9% 16.4% 18.3% 13.9% 17.3% 15.2% 13.8% Aged 30-39 13.9% 15.9% 16.5% 15.0% 13.2% 14.6% 14.6% 13.8% Aged 40-49 15.1% 11.1% 13.7% 13.8% 14.1% 13.9% 14.2% 14.2% Aged 50-59 12.4% 9.6% 9.9% 11.2% 11.9% 11.3% 12.0% 12.8% Aged 60+ 17.1% 13.0% 9.5% 14.5% 17.2% 15.1% 16.9% 19.6% Average age 36.4 34.5 30.7 34.7 35.7 34.9 36.2 37.9

Housing status (% of households) Owner (total) 69.9% 45.2% 58.8% 61.4% 64.5% 62.1% 65.5% 68.7% • Owner (outright) 30.0% 23.2% 16.3% 25.4% 27.5% 25.9% 27.9% 32.9% • Owner (with mortgage) 39.9% 22.1% 42.5% 36.0% 37.0% 36.2% 37.6% 35.8% Renter 29.2% 54.1% 40.9% 37.9% 35.0% 37.2% 33.7% 30.4% Other 0.9% 0.6% 0.3% 0.7% 0.5% 0.7% 0.8% 0.9%

Birthplace (% of population) Australian born 66.2% 63.4% 69.6% 66.2% 86.8% 70.9% 73.9% 74.0% Overseas born 33.8% 36.6% 30.4% 33.8% 13.2% 29.1% 26.1% 26.0% • Asia 11.6% 16.4% 5.8% 11.6% 2.1% 9.4% 7.1% 8.6% • Europe 9.7% 9.7% 8.5% 9.4% 5.9% 8.6% 8.9% 10.5% • Other 12.5% 10.5% 16.0% 12.7% 5.2% 11.0% 10.1% 7.0%

Family type (% of households) Couple with dep't children 52.1% 37.4% 52.7% 47.9% 45.3% 47.3% 46.7% 45.3% Couple with non-dep't child. 7.2% 4.1% 6.5% 6.2% 7.2% 6.4% 7.2% 7.7% Couple without children 19.9% 28.7% 17.6% 22.1% 20.9% 21.8% 22.7% 23.0% One parent with dep't child. 9.3% 6.3% 13.5% 9.2% 12.6% 10.0% 9.7% 9.2% One parent w non-dep't child. 3.3% 2.7% 3.2% 3.1% 3.8% 3.3% 3.4% 3.5% Other family 1.1% 4.1% 1.0% 2.0% 1.1% 1.8% 1.3% 1.1% Lone person 7.1% 16.7% 5.7% 9.6% 9.1% 9.5% 9.0% 10.2%

Source: ABS Census of Population & Housing, 2011; MacroPlan Dimasi

DFO Jindalee 23 Market review and sales potential Section 3: Trade area analysis

3.4 Retail expenditure

MacroPlan Dimasi estimates retail expenditure capacity generated by the main trade area residents based on information sourced from Market Data Systems (MDS), which utilises a detailed micro simulation model of household expenditure behaviour for all residents of Australia. The model takes into account information from a wide variety of sources including the regular ABS Household Expenditure Surveys, national accounts data, Census data and other information. We consider MarketInfo data to be an accurate measure of available retail expenditure and it is widely relied on in the retail industry.

Total retail expenditure is detailed in a number of categories, as follows:

• Take-home food and groceries – goods typically sold in supermarkets and specialty fresh food stores.

• Packaged liquor – packaged beer, wine and spirits such as those purchased at bottle- shops and liquor outlets.

• Food catering – cafes, take-away outlets and restaurants, including liquor consumed on such premises.

• Apparel – clothing, footwear, fashion and accessories.

• Household Goods – giftware, electrical, computers, furniture, homewares, and hardware goods.

• Leisure – sporting goods, music, DVDs, games, books, newsagents and film processing/photography.

• General Retail – pharmaceutical goods, cosmetics, toys, florists, mobile phones.

• Retail Services – retail services such as key cutting, shoe repairs, hair and beauty.

DFO Jindalee 24 Market review and sales potential Section 3: Trade area analysis

Chart 3.1 shows the retail expenditure capacity per person for residents of the identified main trade area for the year 2014/15, and compares these estimates with the average for metropolitan Brisbane and Australia. Spending estimates are presented inclusive of GST. The following points are noted:

• Total retail expenditure per capita is estimated to be about 1 – 2% above the Brisbane average.

• Per capita expenditure on discretionary/non-food retail categories is about 3 – 4% above average.

• Per capita expenditure on apparel is about 7 – 8% the Brisbane average.

DFO Jindalee 25 Market review and sales potential Section 3: Trade area analysis

DFO Jindalee 26 Market review and sales potential Section 3: Trade area analysis

Table 3.3 presents estimates of total retail spending generated by the main trade area population, by trade area sector, over the period from 2015 to 2026. Spending forecasts are presented inclusive of GST and in inflated dollars, with inflation assumed to average 2.0% per annum.

The total trade area retail expenditure market is expected to double in size in the next 10 – 11 years, from about $6.33 billion in 2015 to $12.8 billion by 2026, at an average annual growth rate of 6.6%.The average annual growth rate of 6.6% comprises three components, as follows:

• Residential population growth, which is expected to average 3.6% per annum;

• Real growth in per capita retail expenditure, which is expected to average 0.9% per annum over the forecast period; and

• Retail inflation, which is assumed to average 2.0% per annum.

The total retail expenditure capacity of the main trade area population is expected to grow at 6.4% per annum, from $5.0 billion at 2015 to $9.9 billion by 2026.

Table 3.4 presents projections of spending for the total trade area by retail category, and Table 3.5 presents the estimated spending directed to the apparel category, which is the key category of relevance for DFO Jindalee, disaggregated by trade area sector.

Apparel expenditure generated by the total trade area population in 2015 is estimated at $587 million, including $479 million in the main trade area, and $252 in the primary sector.

Over the forecast period, apparel expenditure by the total trade area population is projected to increase by 6.1% per annum, to reach $1.13 billion, including $898 million in the main trade area and $386 million in the primary sector.

DFO Jindalee 27 Market review and sales potential Section 3: Trade area analysis

Table 3.3 DFO Jindalee total trade area - retail expenditure ($M), 2015-2026*

Year ending Primary Secondary sectors Main Tertiary Total June sector North South TA sector TA

2015 2,636.5 1,370.0 1,001.6 5,008.1 1,325.0 6,333.1 2016 2,755.7 1,451.7 1,101.9 5,309.3 1,406.6 6,715.8 2017 2,871.4 1,548.4 1,229.0 5,648.8 1,507.4 7,156.1 2018 2,992.0 1,651.6 1,370.7 6,014.3 1,615.4 7,629.7 2019 3,120.3 1,767.1 1,523.2 6,410.6 1,733.3 8,143.9 2020 3,257.0 1,896.6 1,686.4 6,840.0 1,862.0 8,701.9 2021 3,401.3 2,036.6 1,868.0 7,306.0 2,001.2 9,307.2 2022 3,552.7 2,185.8 2,042.4 7,780.9 2,158.1 9,939.0 2023 3,709.7 2,343.4 2,203.1 8,256.1 2,333.8 10,590.0 2024 3,873.6 2,512.4 2,376.4 8,762.3 2,523.9 11,286.3 2025 4,044.8 2,693.5 2,563.4 9,301.7 2,729.5 12,031.3 2026 4,223.5 2,887.8 2,765.2 9,876.6 2,951.9 12,828.5

Average annual growth ($M) 2015-2026 144.3 138.0 160.3 442.6 147.9 590.5

Average annual growth (%) 2015-2026 4.4% 7.0% 9.7% 6.4% 7.6% 6.6%

*Inflated dollars & including GST Source: MarketInfo; MacroPlan Dimasi

DFO Jindalee 28 Market review and sales potential Section 3: Trade area analysis

Table 3.4 DFO Jindalee total trade area - retail expenditure by product group ($M), 2015-2026*

Year ending FLG Food Apparel Household Leisure General Retail Total June catering goods retail services retail

2015 2,769 763 587 1,200 331 497 187 6,333 2016 2,941 813 619 1,270 349 525 198 6,716 2017 3,139 872 656 1,350 370 558 211 7,156 2018 3,353 934 696 1,435 393 592 225 7,630 2019 3,585 1,003 740 1,529 418 630 240 8,144 2020 3,837 1,078 786 1,630 445 670 257 8,702 2021 4,110 1,159 837 1,739 474 714 275 9,307 2022 4,395 1,245 889 1,853 504 759 293 9,939 2023 4,690 1,334 943 1,970 534 806 313 10,590 2024 5,005 1,430 1,001 2,094 567 855 334 11,286 2025 5,342 1,534 1,061 2,228 602 908 356 12,031 2026 5,704 1,645 1,126 2,370 640 964 379 12,828

Average annual growth ($M) 2015-2026 267 80 49 106 28 42 17 590

Average annual growth (%) 2015-2026 6.8% 7.2% 6.1% 6.4% 6.2% 6.2% 6.6% 6.6%

*Inflated dollars & including GST Source: MarketInfo; MacroPlan Dimasi

Retail expenditure category definitions:

• FLG: take-home food and groceries, as well as packaged liquor.

• Food catering: expenditure at cafes, take-away food outlets and restaurants.

• Apparel: clothing, footwear, fashion accessories and jewellery.

• Household goods: giftware, electrical, computers, furniture, homewares and hardware goods.

• Leisure: sporting goods, music, DVDs, computer games, books, newspapers & magazines, stationery and photography equipment.

• General retail: pharmaceutical goods, cosmetics, toys, florists, mobile phones and pets.

• Retail services: hair & beauty, optical goods, dry cleaning, key cutting and shoe repairs.

DFO Jindalee 29 Market review and sales potential Section 3: Trade area analysis

Table 3.5 DFO Jindalee total trade area - apparel expenditure ($M), 2015-2026*

Year ending Primary Secondary sectors Main Tertiary Total June sector North South TA sector TA

2015 252.0 142.0 85.5 479.5 107.0 586.5 2016 262.3 149.8 93.7 505.9 113.2 619.1 2017 272.3 159.2 104.1 535.6 120.8 656.3 2018 282.6 169.1 115.7 567.3 128.9 696.3 2019 293.5 180.2 128.0 601.7 137.8 739.5 2020 305.2 192.6 141.2 638.9 147.4 786.3 2021 317.5 205.9 155.7 679.1 157.8 836.9 2022 330.3 220.1 169.6 720.0 169.5 889.5 2023 343.5 235.0 182.2 760.7 182.6 943.3 2024 357.2 250.9 195.7 803.9 196.7 1,000.5 2025 371.5 267.9 210.3 849.7 211.8 1,061.5 2026 386.4 286.0 225.9 898.3 228.1 1,126.5

Average annual growth ($M) 2015-2026 12 13 13 38 11 49

Average annual growth (%) 2015-2026 4.0% 6.6% 9.2% 5.9% 7.1% 6.1%

*Inflated dollars & including GST Source: MarketInfo; MacroPlan Dimasi

DFO Jindalee 30 Market review and sales potential

Section 4: Competitive framework

This section of the report reviews surrounding competitive environment of relevance to DFO Jindalee, including existing and proposed retail facilities of relevance.

DFO Jindalee is focused almost entirely on apparel retailing, therefore, the major competition to the centre comprises the following:

• Other relevant outlet centres; and

• Major traditional shopping centres with significant apparel offerings.

Table 4.1 details the retail facilities which are considered to be the main competitors to DFO Jindalee, with Map 4.1 and 3.1 illustrating their locations.

As previously mentioned, the broader precinct within which DFO Jindalee is located, contains around 40,000 sq.m of retail floorspace, which is a considerable critical mass.

4.1 Outlet retail centres

There are no other major factory outlet centres located within south-western Brisbane, with the only other significant outlet centre in Brisbane being DFO Brisbane Airport, located approximately 25 km north-east of DFO Jindalee.

The centre includes approximately 125 retailers across 20,900 sq.m of floorspace and generally serves the population of northern Brisbane/Sunshine Coast and south-east Brisbane/Logan. This centre is currently undergoing an expansion, which will see a further 30 stores added to the centre and more than 1,000 additional car-spaces.

In addition, to the two DFO centres, Jindalee and Brisbane Airport, there is only one other outlet centre of any significance in South East Queensland, i.e. Harbour Town on the Gold Coast.

DFO Jindalee 31 Market review and sales potential Section 4: Competitive framework

Table 4.1 DFO Jindalee - schedule of competing retail facilities

Retail Dist. by road from Centre GLA Major traders DFO Jindalee (sq.m) (km)

Factory outlet centres

DFO Brisbane 25.0

• Existing 27,300 n.a. • Under construction c. 5,000 n.a.

Regional centres

Mt Ommaney Centre 48,700 Kmart, Target, Big W, Woolworths, 3.0 Coles, Aldi Indooroopilly SC 115,000 Myer, David Jones, Target, Kmart, 5.3 Woolworths, Coles

Sub-regional centres

Toowong Village 35,000 David Jones, Kmart, Coles 7.0 Forest Lake Village SC 20,200 Target, Woolworths, Coles, Aldi 14.0 Redbank Plaza 34,500 Kmart, Target, Coles 15.0

Redbank Plains 18.0 • Redbank Plains SC (existing) 5,600 Woolworths • Redbank Plains SC (p) 18,000 Target (p), Coles (p) Orion Springfield Central 19.0 • Existing 37,200 Big W, Woolworths, Aldi • Under construction 13,800 Target (u/c), Coles (u/c) Booval Fair 19,900 Big W, Woolworths 24.0 Riverlink (Ipswich) 51,400 Target, Kmart, Coles, Woolworths, Aldi 27.0

Source: Property Council of Australia; MacroPlan Dimasi

DFO Jindalee 32 Market review and sales potential Section 4: Competitive framework

4.2 Traditional retail shopping centres

The closest and most relevant regional centres to DFO Jindalee include Indooroopilly SC to the north and Mt Ommaney SC to the south. Both of these centres have undergone major redevelopments over the past 5 years, with Mt Ommaney Centre expanded in 2010 and Indooroopilly more recently, in 2014. In this context, we do not see either centre under- going a major expansion in the foreseeable future.

Indooroopilly SC is a double department store anchored regional shopping centre situated approximately 5.3 km north-east of DFO Jindalee. A major 30,000 sq.m upgrade of this centre was completed in 2014, which means the centre now contains both department store operators, Kmart and Target discount department stores (dds), Coles and Woolworths supermarkets, as well as additional specialty food and fashion retailing, including H&M.

Mt Ommaney Centre is situated around 3 km south of DFO Jindalee and is anchored by three discount department stores (Kmart, Target and Big W) and three supermarkets, as well as including around 130 specialty stores. The centre contains a decent fashion offer of around 50 – 60 tenants.

Other competition in the trade area for apparel spending comes from Orion Springfield Central – which is currently undergoing a major expansion, Redbank Plaza and Forest Lake Village SC to the south, Riverlink SC in Ipswich, and from Toowong Village to the north – which has recently undergone a major refurbishment.

Orion Springfield, in the secondary south sector is currently undergoing a major redevelopment, which will see the addition of a Target dds, as well as mini-major and specialty floorspace and a new cinema complex. We expect the majority of impacts from this expansion will be absorbed by traditional sub-regional shopping centres like Mount Ommaney SC, Forest Lake and Redbank Plaza.

DFO Jindalee 33 Market review and sales potential Section 4: Competitive framework

The Redbank Plains SC (currently a small Woolworths anchored) has approval for a major expansion and redevelopment, including a new retail building to the west of the existing centre including a Target dds, a Coles supermarket, and specialty space, totalling around 18,000 sq.m of retail GLA, as well as the refurbishment and integration of the existing Woolworths anchored centre. Upon completion the centre will contain around 23,000 – 24,000 sq.m of retail GLA.

Riverlink Shopping Centre in Ipswich is the largest retail centre within the tertiary sector. The urban regeneration of the Ipswich CBD (i.e. Ipswich City Heart) is mooted to include a major shopping centre, though there are currently no development plans for the retail component of the project.

DFO Jindalee 34 Market review and sales potential

Section 5: DFO Jindalee future outlook

This section of the report builds upon the earlier sections to provide a high level assessment of the sales and market share potential for the centre in the future.

5.1 Recent retail trends

As mentioned earlier, the sales performance of DFO Jindalee improved considerably between 2011 and 2015, increasing in sales by around 25%. This primarily reflects an improved tenancy mix at the centre and particularly the introduction of a number of new mini-majors.

While aggregate national sales growth in the apparel category has not grown as quickly as other retail categories in recent times, much of this low growth has been driven by strong price discounting and price deflation, rather than a reduction in volumes of stock being purchased.

The arrival of new international mini-major entrants has continued to place pressure on local apparel retailers, however, discount apparel outlet retail in our view, should remain insulated to some extent, as these centres perform a different role in the retail hierarchy, providing an avenue for traditional, well-branded retailers to sell heavily discounted stock.

Furthermore, the available apparel expenditure accessible to DFO Jindalee is expected to grow very strongly in the future, in aggregate volume terms, driven by the massive future population growth in the region.

We consider that there is further upside to the recent sales growth achieved by DFO Jindalee, particularly as its reputation improves and new retailers are introduced to the centre. This potential increase in sales performance is discussed further and quantified in the next sub-section.

DFO Jindalee 35 Market review and sales potential Section 5: DFO Jindalee future outlook

5.2 Current market share and base sales potential

On the basis of our analysis of the Australian outlet centre industry, we have developed a methodology for assessing the broad ‘base’ sales potential for outlet centres using a market share approach. The sales assessment comprises three distinct components, as follows:

• Apparel sales – based on our analysis of most existing outlet centres across Australia, we have established that the more successful centres achieve an average market share of apparel spending from their main trade areas in the range 10% - 15%.

• Non-apparel sales – at successful outlet centres, apparel sales typically account for 80% - 85% of total centre sales, with the remaining 15% - 20% made up of sales from other retail categories. The majority of these remaining sales are typically generated by food catering, household goods and leisure items.

• Sales from beyond the trade area – outlet centre also capture sales from beyond the defined main trade area.

Adopting this approach, Tables 5.1 and 5.2 detail the current and future projected sales potential for DFO Jindalee under two potential market share scenarios. Table 5.1 presents an outlook of sales potential under a constant market share scenario and Table 5.2 presents an outlook of sales potential for the centre assuming a market share uplift based on an improved tenancy mix, and greater occupancy levels. The market share uplift also accounts for absorption of vacant GLA over time and indeed, the potential provision of additional retail floorspace at the centre.

Table 5.1 shows that in our estimation, as at July 2015, DFO Jindalee captures an 11.5% market share of the available apparel expenditure generated by the primary sector population; an estimated 7.7% market share of apparel expenditure of the main trade area; and an estimated market apparel expenditure market share of 6.6% from the total trade area. We estimate that around 10% of total apparel sales at the centre are generated from beyond the total trade area and non-apparel sales account for around 12.6% of total sales at the centre.

DFO Jindalee 36 Market review and sales potential Section 5: DFO Jindalee future outlook

Having regard to estimated growth in the apparel expenditure market across the trade area, and assuming that the centre maintains its market shares, and maintains its occupancy levels, we estimate that the centre could achieve sales in the order of $60.3 million (ex GST) by 2020.

Table 5.1 DFO Jindalee - Indicative sales potential, 2015-2020* (Constant market shares)

Estimated sales potential ($M) Category 2015 2016 2017 2018 2019 2020

Estimated apparel expenditure Primary sector 252 262 272 283 294 305 Secondary north 142 150 159 169 180 193 Secondary south 86 94 104 116 128 141 Main trade area 479 506 536 567 602 639 Tertiary 107 113 121 129 138 147 Total trade area 587 619 656 696 740 786

Market share & sales potential: Base case - constant market shares Primary sector 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% Secondary north 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Secondary south 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% Main trade area 7.7% 7.7% 7.6% 7.5% 7.5% 7.4% Tertiary 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% Total trade area 6.6% 6.6% 6.5% 6.4% 6.4% 6.3%

Est. sales MTA 38.8 40.7 42.7 44.8 47.1 49.6 Est. apparel sales BTA 4.3 4.5 4.7 5.0 5.2 5.5 Total apparel sales 43.1 45.2 47.4 49.8 52.4 55.1

Non-apparel sales 6.2 7.2 8.2 9.2 10.2 11.2 Share of total 12.6% 12.8% 13.1% 13.3% 13.6% 13.6% Total sales potential 49.3 52.4 55.6 59.0 62.6 66.3 Total sales potential (ex GST) 44.8 47.6 50.6 53.7 56.9 60.3

*Expenditure market is expressed in inflated dollars, inclusive of GST *Sales are expressed in inflated dollars, both inclusive and exclusive of GST Source: M acroPlan Dimasi

DFO Jindalee 37 Market review and sales potential Section 5: DFO Jindalee future outlook

We consider there is a good opportunity for DFO Jindalee to achieve total retail sales much higher than the figures detailed above, through an improved tenancy mix, increased levels of occupancy of existing floorspace and assuming that the additional 2,500 – 3,000 sq.m of proposed space is developed and tenanted with retail tenants.

Assuming the quality of the tenancy mix can continue to be improved, and with a potential expansion of the retail offering, we consider that the centre could comfortably increase its market shares of the available apparel expenditure market and could potentially achieve a sales uplift 20 - 25% higher than the ‘base case’.

Table 5.2 presents the indicative sales potential for the centre to 2020, assuming that the primary sector apparel market share improves to 14.5%, the main trade area market share improves to 9.3% and the total trade area market share improves to around 8.0%.

Under these assumptions, we estimate DFO Jindalee could potentially achieve sales in the order of $73 – 74 million (ex GST) by 2020.

DFO Jindalee 38 Market review and sales potential Section 5: DFO Jindalee future outlook

Table 5.2 DFO Jindalee - Indicative sales potential, 2015-2020* (Potential market share uplift)

Estimated sales potential ($M) Category 2015 2016 2017 2018 2019 2020

Estimated apparel expenditure Primary sector 252 262 272 283 294 305 Secondary north 142 150 159 169 180 193 Secondary south 86 94 104 116 128 141 Main trade area 479 506 536 567 602 639 Tertiary 107 113 121 129 138 147 Total trade area 587 619 656 696 740 786

Market share & sales potential: Market share uplift Primary sector 11.5% 12.1% 12.7% 13.3% 13.9% 14.5% Secondary north 3.0% 3.2% 3.4% 3.6% 3.8% 4.0% Secondary south 4.5% 4.7% 4.9% 5.1% 5.3% 5.5% Main trade area 7.7% 8.1% 8.4% 8.7% 9.0% 9.3% Tertiary 1.6% 1.7% 1.8% 1.9% 2.0% 2.1% Total trade area 6.6% 6.9% 7.2% 7.5% 7.7% 8.0%

Est. sales MTA 38.8 42.9 47.3 52.0 57.2 62.8 Est. apparel sales BTA 4.3 4.8 5.3 5.8 6.4 7.0 Total apparel sales 43.1 47.6 52.5 57.8 63.5 69.8

Non-apparel sales 6.2 7.2 8.2 9.2 10.2 11.2 Share of total 12.6% 12.8% 13.1% 13.3% 13.6% 13.6% Total sales potential (inc. GST) 49.3 54.8 60.7 67.0 73.7 81.0 Total sales potential (ex GST) 44.8 49.8 55.2 60.9 67.0 73.6

*Expenditure market is expressed in inflated dollars, inclusive of GST *Sales are expressed in inflated dollars, both inclusive and exclusive of GST Source: M acroPlan Dimasi

DFO Jindalee 39 Market review and sales potential