Review of Illawarra Retail Centres Final Report Department of Planning & Environment June 2014
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Review of Illawarra retail centres Final report Department of Planning & Environment June 2014 140005-Final report (retail)-140630 This report has been prepared for Department of Planning & Environment. SGS Economics and Planning has taken all due care in the preparation of this report. However, SGS and its associated consultants are not liable to any person or entity for any damage or loss that has occurred, or may occur, in relation to that person or entity taking or not taking action in respect of any representation, statement, opinion or advice referred to herein. SGS Economics and Planning Pty Ltd ACN 007 437 729 www.sgsep.com.au Offices in Canberra, Hobart, Melbourne and Sydney 140005-Final report (retail)-140630 TABLE OF CONTENTS EXECUTIVE SUMMARY I Retail market i Retail hierarchy ii Retail demand and supply ii Implications iii 1 INTRODUCTION 1 1.1 Introduction 1 1.2 Strategy and policy review 1 Illawarra Regional Strategy 1 Illawarra Discussion Paper 3 Local Government strategies 3 2 RETAIL AT A GLANCE 5 2.1 Regional drivers of growth and change 5 2.2 Retail centres 8 2.3 Retail hierarchy 10 Regional Cities 10 Major Regional Centres 11 Major Towns 12 Town Centres 13 Neighbourhood Centres 14 2.4 Summary of floorspace supply within the Illawarra region 14 Method for estimating retail floorspace 14 3 RETAIL MODELLING 16 3.1 SGS retail gravity model 16 3.2 Model inputs 17 Resident retail expenditure 17 Visitor retail expenditures 21 Turnover by centre 23 Travel time matrices 25 3.3 Future floorspace requirements 25 3.4 Supply analysis 27 Planned floorspace 27 Gap analysis 28 Capacity 28 3.5 Summary 29 REFERENCES 30 Review of Illawarra retail centres EXECUTIVE SUMMARY SGS was commissioned by the Department of Planning & Environment (DP&E) to conduct a study of retail centres in the Illawarra region, to inform the development of a new Illawarra Regional Growth Plan. This included determining trends and drivers in the retail market, identifying capacity and supply blockages, and projecting future requirements for zoned land. The key objective of the retail centres study is to provide an evidence base to inform policy decisions about retail centres, particularly centres hierarchy, roles of centres and management of proposals for out of centre retailing. Retail activity is based on expenditure in the system, itself based on local population. As such, this type of study links closely with an assessment of housing and population changes. Commercial investment responds to different drivers, with locational choices based on factors such as broad changes in the economy and land attributes such as visibility and accessibility. Commercial prospects are therefore better considered as part of a study into the economy and employment trends rather than housing, and an assessment of the commercial market in the Illawarra has not been included in this work. The Illawarra region includes the local government areas of Wollongong, Shellharbour and Kiama, as well as the Shoalhaven LGA which has recently been included in the region. Wollongong is the largest LGA and contains the regional centre for the region, Wollongong. The other major centres include Nowra, Warrawong, Dapto and Shellharbour city centre. Between 2011 and 2031 the population of the Illawarra region is projected to grow from 394,000 to 465,000. The average unemployment rate in the Illawarra region (excluding Shoalhaven) is 2% higher than the NSW average and 17% of workers from the Illawarra region commute to Sydney for work. There are currently 136,000 people employed with the Illawarra region and a minimum of 24,250 additional jobs will be required over the next 20 years to respond to population growth and existing unemployment challenges2. Retail market The major trends currently affecting the retail market include the deregulation of shopping hours, development of larger supermarkets and discount supermarkets, demand for out-of-centre retailing premises (such as for bulky goods), increased diversification and stand-alone centres, discount department stores, needs for convenience shopping and increased popularity of electronic retailing. The deregulation of shopping hours and increase in retailing hours of supermarkets has changed the ‘where’ and ‘when’ of consumer shopping habits, with demand drifting towards the weekend and the importance of smaller Neighbourhood Centres diminishing. In addition, development of larger supermarkets has led to the decline of local ‘corner’ stores, unable to compete with larger supermarkets that often offer lower prices for consumers. Out-of-centre retailing continues to impact on existing retail centres and existing industrial uses. Bulky goods retailing within industrial precincts can also place upwards pressure on rents, potentially forcing industrial land uses to relocate to cheaper areas. Certain retail forms appear to be doing well. Retail centres are increasingly diversifying through the continued development of stand-alone centres, including large indoor shopping centres such as Westfield, while factory outlet and discount department store retailing is now considered a permanent part of the retail landscape and a potential threat to the viability of neighbourhood centres. In addition, the development of convenience shopping has been an emerging retail trend, with convenience stores servicing consumers who make frequent trips and purchases of small amounts of food items. 2 NSW Government, 2013, from The Illawarra over the next 20 years: a discussion paper. These figures were prepared by the NSW Government before the inclusion of Shoalhaven LGA in the Illawarra region. Review of Illawarra retail centres i Online shopping in Australia is becoming more prominent. Internet retail expenditure in Australia tripled from $40 billion in 2004-05 to $143 billion in 2009-10. This trend is likely to intensify, with implications for land use in centres (with potential for reduced demand for traditional retail space, and increasing demand for light industrial zoned space to accommodate the warehousing and logistics operations that support this business model). Alongside online retailing, existing shopping centre developments are also faced with increasing competition from new developments such as Stockland Shellharbour and GPT West Keira. On the demand side, high unemployment in the region and the resulting reduced expenditure has been a notable constraint on the retail market, while on the supply side, the high costs associated with development are unlikely to change in the short term, affecting the retail market in major centres in particular. Retail hierarchy Shellharbour’s role has been growing in recent years, with an increasing population, catchment area and employment as well as good retail and service provision. However, Wollongong remains the Illawarra’s only regional city, with major tertiary education and health facilities, strong public transport and infrastructure provision, and a key role in providing higher order business, civic, recreation, community and entertainment uses. As such, Wollongong will continue to be the main driver for economic growth and employment in the region. SGS believes the current status of both centres to be appropriate given their different roles and functions, with significant overlap only likely in the retail sector. The Innovation Campus (iC), developed in 2008 to provide a regional hub for knowledge-based industries, provides commercial office space in addition to supporting retail. Although it has a unique competitive offer that provides a strong economic benefit to the region, in practice it appears to attract not just research and development uses, but also general commercial uses that might otherwise locate in the Wollongong CBD. It is important that strategies and plans support the iC without jeopardising the role and function of Wollongong CBD, ensuring it remains an attractive location for commercial uses in line with its position in the centres hierarchy. From a strategic perspective, the Department of Planning and Environment may want to consider downgrading Unanderra from Major Town status due to its changing role and function, relatively low level of retail provision, limited opportunities for local population increases and the surrounding competitive offer. Further studies at a local level are likely to be required to provide a more detailed assessment. No other changes to the existing hierarchy are considered appropriate for further investigation. We have assumed that in the revised hierarchy for the newly defined Illawarra region (which includes Shoalhaven LGA), that Nowra is a Major Regional Centre and Ulladulla a Major Town. These rankings are in line with their previous status in the South Coast and befitting of the role and function they serve, and the retail floorspace each offers. Retail demand and supply The SGS Retail Gravity Model distributes the available retail expenditure using a gravity distributional mechanism. The model looks at the likelihood or propensity of a particular person to gravitate towards a retail centre within a defined retail system and estimates how much of a person’s retail expenditure will be spent at a particular centre. Overall, the results show a relatively close match between the likely floorspace demand for the Illawarra, and the future supply in terms of current and planned retail floorspace. There is a substantial amount of development capacity in the existing zoned areas if required, with further increases in retail floorspace unnecessary. However,