Kaufland stores in Victoria: Advisory Committee

Tranche 3 – Braybrook Proposal

Statement of evidence of Anthony Dimasi

2 8 November 2019

Dimasi & Co

Tony Dimasi [email protected]

Table of contents

Expert witness details 1

Introduction 3

1. Submissions received 4

2. Response to submissions 6

Appendix 1: Sunshine Marketplace trade area map 9

Appendix 2: Curriculum Vitae 12

Expert witness details

Name and address of expert Mr Tony Dimasi Economic Consultant Dimasi & Co 12 Argent Court Riddells Creek VIC 3431 [email protected]

Expert’s qualifications and experience • Bachelor of Arts (Hons.), University of Melbourne

• Master of Arts, University of Melbourne

My CV is included as Appendix 2 to this statement of evidence. I have extensive experience in the field of retail economics and analysis gained over the past 32 years, having provided independent advice on numerous retail development projects and proposals throughout all parts of Australia, to a broad range of clients.

Expert’s area of expertise • I have practised as a consulting economic and retail analyst since 1982. During that time I have worked in all states of Australia and also in New Zealand and Asia, and have advised on many thousands of retail developments of all types and sizes.

• My assessments have covered demand and supply analysis, commercial feasibility assessments and economic impact assessments, for many thousands of shopping centres of all sizes and mixes, as well as numerous freestanding retail stores, including supermarkets, discount department stores, toys category killer stores, book stores, special apparel stores, smaller foodstores and packaged liquor stores of all sizes.

• I have appeared as an expert witness in the various jurisdictions across all states of Australia and New Zealand on numerous occasions, including:

- The Administrative Appeals Tribunal (AAT) of Australia;

- The Land and Environment Court of New South Wales;

- Independent Ministerial Panels and VCAT in Victoria;

- The Planning and Environment Court of Queensland;

Kaufland stores in Victoria: Advisory Committee Tranche 3 – Pakenham Proposal 1 Statement of Evidence of Anthony Dimasi Expert witness details

- The State Administrative Tribunal in Western Australia;

- The Environment, Resources and Development Court of South Australia;

- The Resource Development Planning Commission in Tasmania;

- The Liquor Licensing Court of South Australia; and

- The Petroleum Products Retail Outlets Board of South Australia.

I have also appeared as an expert witness before various government and ACCC inquiries into the retailing of food, liquor and groceries industry in Australia, including:

- the 1999 Joint Parliamentary Inquiry into the Australian Retail Sector (the Baird Inquiry);

- the Inquiry into the Competitiveness of Retail Prices for Standard Groceries (2008) undertaken by the Australian Consumer and Competition Commission (ACCC); and

- the 2004 ACT Grocery Inquiry (the Martin Inquiry).

• Over the past 37 years I have provided, and continue to provide, research and advisory services to a wide range of clients, including major retailers and most of Australia’s shopping centre management and development groups.

• I have undertaken work on numerous occasions throughout the Footscray region, relating to both existing and proposed retail developments.

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 Advisory Committee.

Anthony Dimasi 28 November 2019

Kaufland stores in Victoria: Advisory Committee Tranche 3 – Pakenham Proposal 2 Statement of Evidence of Anthony Dimasi

Introduction

This statement focusses on the matter of economic impacts relating to the proposed Kaufland store at Braybrook. The statement has been prepared, for the assistance of the Advisory Committee, on the instructions of Planning & Property Partners, acting for Kaufland Australia Pty Ltd.

I have previously prepared an Economic Impact Assessment (EIA) for the proposed Kaufland development at Braybrook, and I adopt the prepared EIA as my expert evidence in this case.

I have now had the opportunity of reading the various submissions made to the Committee on this proposal, and in the balance of this statement I respond to the matters relating to economic impact that have been raised in those submissions.

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1. Submissions received

1.1 There are six submissions made in relation to the proposed Kaufland store at Braybrook and three of those submissions refer to economic impact matters, with two being objectors – Vicinity Centres Pty Ltd and Challenger, the co-owners of Sunshine Marketplace Shopping Centre (Sunshine Marketplace submission) as well as ISPT Pty Ltd, the owner of Central West Shopping Centre (ISPT).

1.2 The submission from ISPT makes the following statement in relation to economic matters:

‘The economic assessments fail to identify Sunshine in the trade area.’

1.3 The submission from ISPT makes the following point at sub-section 2.1 Economic Concerns on pages 3 and 4:

‘There is already an overprovision of supermarket floorspace in the local area.’

Following that statement, a number of 496 sq.m per 1,000 residents is put forward as the assessed level of supermarket floorspace provision within the defined main trade area, although no source for the information is provided.

1.4 In the same sub-section the ISPT submission also refers to

‘The cumulative impact of ad hoc core retail development.’

Following that statement, reference is made to the former Masters premises at 330 Ballarat Road which has recently been converted to a Coles supermarket together with specialty floorspace and other retail uses.

1.5 The third point under Economic Concerns referred to by ISP is the following:

‘The trading impact on food, liquor and grocery (FLG) tenants at Central West is likely much higher relative to total impact.’

Following that claim, ISPT estimates that the likely turnover impact on FLG retailers at Central West Plaza would be in the order of 12%, as compared to a total centre impact of 9.8%.

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1.6 Next in sub-section 2.1 ISPT states:

‘Trading performance of the proposed Kaufland store appears to be understated, hence an underestimated impact level.’

There is no basis provided for this claim other than ‘ISPT’s experience in particular in the supermarket sector.’

1.7 The final point claimed by ISPT at sub-section 2.1 is:

‘The Central West Centre is unlikely to achieve the turnover growth assumed in the report, again, this would have underestimated the impact level.’

1.4 The third submission which refers in a broad sense to economic matters is from Maribyrnong City Council (Maribyrnong) and makes the following point:

‘Maribyrnong City Council is experiencing strong population growth, with 20,500 new dwellings expected by 2031. With an increase in population comes the need for localised employment opportunities across a range of sectors, including retail. Council welcomes the addition of a new supermarket within an identified Major Activity Centre (Central West).’

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2. Response to submissions

2.1 Vicinity Centres, on its website, lists the following attributes of Sunshine Marketplace Shopping Centre:

- Gross lettable area: 34,148 sq.m, with 72 tenants.

- Major tenants: Big W discount department store, Village Cinemas and Woolworths supermarket.

- Centre annual turnover: $158.1 million.

- Centre occupancy rate by gross leasable area: 100%.

- Total trade area served: 193,000 (or approximately four times the population of the identified main trade area, in the EIA, for the proposed Kaufland supermarket).

2.2 The Sunshine Centre is taken into account in the EIA, and at Table 2.7 on page 39 of the EIA an estimate of likely impact on the centre is provided, showing an expected impact on the total centre in the order of 1.9%. Even if the impact on the Sunshine Centre were to be twice that level – which would mean that the likely impacts on the other competing centre would on average then be lower – that would take it to 3.8%. There is therefore no reason for any concern about the likely impact on the Sunshine Centre in total, or indeed on Sunshine Marketplace as the major retail component of the Sunshine Centre.

2.3 This is particularly the case given that the main trade area which is served by Sunshine Marketplace – and by implication also by the broader Sunshine Centre – is far greater in extent than that which is likely to be served by the proposed Kaufland store at Braybrook. That in turn means that the likely impact of the Kaufland store on Sunshine Marketplace will be minimal, since the centre is most likely drawing the bulk of its sales from well beyond the defined catchment for the proposed Kaufland store at Braybrook. This is made clear in the trade area map which is listed for Sunshine Marketplace on the Vicinity website, and which I have included as Appendix 1 to this statement.

Kaufland stores in Victoria: Advisory Committee Tranche 3 – Pakenham Proposal 6 Statement of Evidence of Anthony Dimasi 2 Response to submissions

2.4 The reference in the ISPT submission to the claimed supermarket floorspace provision within the defined main trade area for the proposed Kaufland Braybrook development does not appear to have any basis. The number quoted is 496 sq.m per 1,000 residents, however, there is no source provided for this number. In the EIA I indicated at page 28 that the total provision of supermarket floorspace within the trade area is an estimated 20,000 sq.m. With an estimated 2019 population of 56,371 (as detailed in Table 2.3 at page 33 of the EIA) that means an estimated supermarket floorspace provision in the order of 355 sq.m per 1,000 residents. In any case, I do not consider that the level of supermarket floorspace provision in any given area, particularly in one trade area, is a definitive measure to be used as justification for the exclusion of a potential new operator which can add further competition and deliver a net community benefit.

2.4 I agree with the ISPT submission that the trading impact on food, liquor and grocery tenants at Central West is likely to be higher than the total centre impact, however, that needs to be considered against the background of very substantial trade area population growth which is detailed in the EIA – with an estimated 22,000 additional residents expected to be accommodated within the main trade area over the period 2019 to 2031 – and also acknowledged in the Maribyrnong submission.

2.5 In any case, the assessment of economic impact is required to focus on centre impacts not on individual traders or businesses. There is no reason, given the context of rapid trade area population growth, why each of the two supermarkets at Central West Plaza should not continue to experience significant sales growth, provided they are offering what the trade area residents require from a modern supermarket. Further, as I have indicated at page 40 of the EIA, Central West SC is a mixed use property with a number of components other than the retail floorspace and the addition of Kaufland within walking distance of the centre also offers some potential for the precinct to be considerably strengthened as a retail location, and thus for some spin- off benefits to Central West SC. This potential was not factored into my impact assessment, but I consider that it is a likely outcome that could benefit the existing Central West SC.

2.5 I disagree with the ISPT submission that the anticipated trading performance of the Kaufland store has been understated. An annual sales volume of $47.5 million would be a substantial and successful trading volume for the store and I consider that, based on my very extensive experience of supermarket trading conditions in all locations

Kaufland stores in Victoria: Advisory Committee Tranche 3 – Pakenham Proposal 7 Statement of Evidence of Anthony Dimasi 2 Response to submissions

across Australia, this estimate is sound. I have outlined throughout the EIA the reasons and the basis for my estimate.

2.6 With regard to ISPT’s claim that Central West SC is unlikely to achieve the turnover growth assumed in the EIA, that would imply, if true, that the centre is not effectively meeting the needs of main trade area residents. The projected population growth will occur virtually on the centre’s doorstep, and it is a designated Major Activity Centre for the surrounding sub-region. If it is not able to meet those growing needs effectively, then that in turn suggests that the addition of a new retail offer which can substantiate the existing offer of the centre is even more warranted, and a Kaufland supermarket will go a long way to meeting the needs of the rapidly growing trade area population.

2.7 It is also does not automatically follow that if Central West Plaza’s sales do not grow in line with trade area expenditure growth then the centre will suffer a greater impact. This is because the level of impact likely to be suffered by any one centre is a function not just of its total sales volume but also its total market penetration. It follows that if the growing trade area expenditure is not being captured by Central West Plaza, then it must be going elsewhere. The retention of some of that expenditure by a new centre or retailer, such as the proposed Kaufland store, will then impact those alternative destinations rather than Central West Plaza.

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Appendix 1: Sunshine Marketplace trade area map

Appendix 2: Curriculum Vitae