Economics Expert Witness Statement - VPA · Economics Expert Witness Statement ... • Clients include AMP Capital Shopping Centres, ... Extends East from Patterson Drive/Nature Reserve

Economics Expert Witness Statement

Donnybrook & Woodstock Precinct Structure Plan

for

Monteleone Family

May 2016


Donnybrook & Woodstock Precinct Structure Plan Area 2

1.1 Name and address of expert

Mr Michael Chappell

Managing Director

Pracsys Economics

Level 3, Suite 162

580 Hay Street, Perth WA 6000

1.2 Expert’s Qualification and Experience

Qualifications:

• Bachelor of Economics (Hons)

• Chartered Management Consultant

• Member of the Australian Institute of Company Directors

Experience:

• Conducted over 200 projects in retail systems network analysis, activity centre policy and strategy, retail

feasibility, economic impact analysis and centre activation in every major Australian city

• Five years in retail property development with Hames Sharley, conducting retail and commercial

feasibility assessments and impact analyses, including development and deployment of retail gravity

models and household expenditure models

• Founded Pracsys Economics in 1996

• Twenty years experience as founder and Managing Director of Pracsys Economics, supporting

government and private sector clients in many aspects of activity centre policy, planning, development

and operation

• Clients include AMP Capital Shopping Centres, Westfield, Scentre Group, Perron Group, Mirvac,

Federation Centres, Lend Lease and Australian Unity Investments.

1.3 Expert’s Area of Expertise

Preparation of policies and strategies for state and local governments detailing the performance of activity

centre networks comprising retail, office, service, community and related uses.

Economic feasibility assessments of activity centre developments, including retail sales modelling, centre

feasibility assessments, retail impact analysis, activity centre configuration studies and investment advice.

Analysis of retail requirements, floorspace needs, retail structure and trends in the retail industry.



1.4 Other significant contributor

Robert Kyne

Senior Anlayst

Pracsys Economics

Level 3, Suite 162

580 Hay Street, Perth WA 6000

1.5 Qualifications of other significant contributor

Qualifications:

• Bachelor of Commerce (majoring in Global Economics)

• Graduate Diploma in Sustainability Studies

Experience:

• Two years in Departments of Mines and Petroleum, Treasury and Finance, and State Development

assisting in a broad range of industry development and performance measurement initiatives

• Five years experience at Pracsys Economics working in research, economic impact assessments,

economic development strategy and retail feasibility analysis

• Appointed Head of Analytics at Pracsys Economics in 2015

1.6 Significant Contributor’s Area of Expertise

Expert in retail demand and supply analysis, retail gravity models, employment allocation models, economic

clustering analysis, demographic modelling, property development economic models and spatial activity

centre impact analysis.

Expert in analysis of retail requirements, floorspace needs, retail structure and trends in the retail industry.



2 Instructions that Define the Scope of Opinion

2.1 Instructions

My instructions came from Rigby Cook Lawyers to advise on the following matters:

1. Consider the retail hierarchy in the exhibited Donnybrook and Woodstock PSP with reference to the PSP

guidelines. Are the allocations of retail floorspace sensible and justifiable given the geographic

considerations of the catchment?

2. What would your view be if on the Monteleone’s Land the retail floorspace near the cheese factory site

was increased to allow a supermarket and specialty shops pursuant to a soft cap of 2,500 m2? Would

this have a deleterious impact on the rest of the retail hierarchy in the PSP area? If not, why not? If so,

what would be the extent of the impact? If there is a deleterious impact, what is your opinion as to

whether the level of impact is acceptable?

3. The three main principles for town centre locations are set out in Section 4.8 of the Essential Economics

2014 report, In your opinion are the principles being met?

4. The PSP locates two centres LTC-1 and LTC-2 with two full line supermarkets. Does this meet the

Guideline principles, if not, why not?

5. What is your assessment of the population catchment of LTC-3 and the Cheese Factory site ?

6. Do you consider that LTC-3 would be viable?

7. Would a retail facility at the cheese factory site be viable and if so at what size?

8. Would such a centre impact LTC-2 and LCC-2?

2.2 Facts, Matter and Assumptions Upon Which the Report Proceeds

My Statement of Evidence has had regard to publicly available information, including:

• ABS Household Expenditure Survey Catalogue 6530

• ABS Retail Trade Catalogue 8501.0

• ABS Wage Price Index, catalogue 6345.0

• The Shopping Centre Directory and the Pracsys database of sales data for shopping centres

• The reports and publications listed below

Data from these sources has been used to construct a static demand and supply model in the form of a

multiple page spreadsheet. The parts of the model and the methodology used to analyse the data is

described in Section 2.4 below.



2.3 Documents, Materials and Literature used in Preparing the Report

• Essential Economics Regional Town Centre and Employment Land Assessment (PSP 1067 Donnybrook,

PSP 1096 Woodstock, PSP 25.2 English Street) June 2014

• Essential Economics Advice on the Future Urban Structure for Donnybrook and Woodstock PSP (letter)

June 2015

• Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, November 2015

• Growth Areas Authority Precinct Structure Planning Guidelines Part Two (revised 2013)

2.4 Methodology

Convenience retail is defined as frequently purchased goods that are generally found in supermarkets and

convenience stores (e.g. food and beverages, groceries, personal items). The majority of floorspace within

the Donnybrook/Woodstock PSP will be convenience retail to service the day to day needs of the catchment.

Comparison shopping needs will primarily be serviced by the Principal Centre outside of the immediate PSP

Area with lesser needs serviced by Local Town Centres.

A static demand analysis was undertaken to analyse the impact on the network of activity centres in the

Donnybrook/Woodstock PSP Area resulting from a proposed expansion of convenience retail floorspace of

1,500m2 at LCC-1.

The analysis focused on the local catchment in the Donnybrook/Woodstock PSP Area and examined how

convenience retail expenditure would be distributed across the network under baseline and expansion

scenarios.

The model considers expenditure at a household level and distributes it to the activity centre network

according to distance and the amount of retail floorspace found at each centre. The model incorporates the

dwelling distribution across the PSP Area1 as well as the location and spatial configuration of each activity

centre in the network2.

Income information of the residents currently found within the general PSP Area have been combined with

the Australian Bureau of Statistics (ABS) Household Expenditure Survey to inform an estimate of average

convenience based spending within the PSP. Based on this data, an estimate of the convenience retail

expenditure pools in the region has been calculated. These numerous expenditure pools were then

distributed based on their relative proximity to activity centres and the relative attractiveness or size of the

centre.

The results of this modelling were then examined against knowledge of viable floorspace productivities to

inform analysis. The assumptions that inform this modelling can be found below.

A map of the PSP Area is provided showing the location of the network of centres.

1 Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, November 2015 pp 12 & 60 2 Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, November 2015 p 18



2.5 Modelling Assumptions

The following assumption underpin the modelling used in this report, including:

• Dwelling numbers

• Income quintile distribution

• Dwelling distribution

• Dwelling convenience expenditure

• Distribution of expenditure

Unless otherwise mentioned all assumptions and result describe the situation at full build out for the PSP

Area.



Figure 1. Dwelling Forecasts (Medium Scenario)

Essential Economics MPA

18,000 16,600

These data are derived from the Essential Economics3 and MPA4 medium series dwelling forecasts.

Figure 2. Income Quintile Distribution for Study Area

First Quintile Second Quintile Thilrd Quintile Fourth Quintile Fifth Quintile

6% 25% 21% 37% 11%

These data are derived from the Australian Bureau of Statistics Household Expenditure Survey5 escalated to

2016 dollars. As expenditure rates for various types of goods and services vary with income level, the

quintiles assist in projecting future expenditure rates as population demographics change.

Figure 3. Dwelling Distribution

Parcel Description % of Dwellings

Dwellings (Essential Economics)

Dwellings (MPA)

1 South West Corner, Extends North to Cameron St and East to the Gas Easement 28% 5,012 4,622

2 South East Corner, Extends from the Gas Easement to the Western Boundary and North to Cameron Street

28% 5,107 4,709

3 Mid West, Extends east to gas easement and north to Gunns Gully Rd 13% 2,399 2,212

4 Mid East, extends east from gas easement and north to Gunns Gully road 8% 1,472 1,357

5 Mid Northern, Extends East from Patterson Drive/Nature Reserve and north of Gunns Gully Rd

16% 2,906 2,680

6 Northern Most Parcel surrounding LCC-6 6% 1,103 1,017

Total N/A 100% 18,000 16,600

These data shows the distribution of dwellings across the PSP Area in six lands parcels. The boundaries of

these parcels were developed by Pracsys, but concord with the features shown in MPA Plan 4: Land Use

Budget6.

3 Essential Economics Regional Town Centre and Employment Land Assessment (PSP 1067 Donnybrook, PSP 1096 Woodstock, PSP 25.2 English Street) June 2014 p23 4 Pracsys (2016) analysis of Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, Nov 2015 5 Australia Bureau of Statistics Household Expenditure Survey 2009/2010 Catalogue 6530 6 Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, November 2015, p12



Figure 4. Expenditure Pools

Parcel Expenditure $ (Essential Economics)

Expenditure $ (MPA)

1 96,214,844 88,731,467

2 98,025,098 90,400,924

3 46,056,716 42,474,527

4 28,249,584 26,052,395

5 55,784,686 51,445,877

6 21,180,319 19,532,961

Total 345,511,248 318,638,151

This data is derived by multiplying the number of household by the estimated convenience retail

expenditure per households across the six land parcels.

Figure 5. Household Expenditure Distribution to Retail Centres (no LCC-1 expansion)

Convenience Retail (est) Parcel 1 Parcel 2 Parcel 3 Parcel 4 Parcel 5 Parcel 6

PC 15,000 5.00% 4.00% 7.50% 6.50% 7.00% 46.50%

LTC-1 12,000 11.50% 44.00% 30.00% 52.50% 45.50% 4.00%

LTC-2 7,500 41.50% 21.50% 19.00% 22.50% 7.50% 2.50%

LTC-3 4,500 19.25% 4.00% 19.50% 11.50% 12.50% 2.50%

LTC-4 2,000 2.50% 13.50% 2.50% 3.50% 2.00% 0.50%

LCC-1 1,000 4.00% 3.00% 5.00% 0.25% 0.50% 0.25%

LCC-2 2,500 13.50% 5.40% 5.00% 0.25% 0.50% 0.25%

LCC-3 1,000 1.00% 1.00% 8.00% 0.25% 2.00% 2.50%

LCC-4 500 0.50% 2.50% 1.00% 1.00% 2.00% 1.00%

LCC-5 1,500 1.00% 1.00% 2.00% 1.50% 20.00% 5.00%

LCC-6 1,000 0.25% 0.10% 0.50% 0.25% 0.50% 35.00%

48,500 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

These data show the expenditure captured from each land parcel to each activity centre in the PSP Area

network with no LCC-1 expansion)



Figure 6. Household Expenditure Distribution to Retail Centres (LCC-1 expansion)

ConvenienceRetail(est) Parcel1 Parcel2 Parcel3 Parcel4 Parcel5 Parcel6

LPTC 15,000 4.75% 3.75% 7.40% 6.50% 7.00% 46.50%

LTC-1 12,000 11.25% 43.50% 30.00% 51.50% 45.50% 4.00%

LTC-2 7,500 40.50% 19.90% 18.00% 22.50% 7.50% 2.50%

LTC-3 4,500 17.75% 3.50% 18.50% 11.50% 12.50% 2.50%

LTC-4 2,000 2.25% 13.50% 2.50% 3.50% 2.00% 0.50%

LCC-1 2,500 9.00% 6.25% 7.50% 1.25% 0.50% 0.25%

LCC-2 2,500 12.00% 5.25% 4.90% 0.25% 0.50% 0.25%

LCC-3 1,000 0.90% 1.00% 7.70% 0.25% 2.00% 2.50%

LCC-4 500 0.50% 2.25% 1.00% 1.00% 2.00% 1.00%

LCC-5 1,500 0.90% 1.00% 2.00% 1.50% 20.00% 5.00%

LCC-6 1,000 0.20% 0.10% 0.50% 0.25% 0.50% 35.00%

50,000 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

These data show the expenditure captured from each land parcel to each activity centre in the PSP Area

network with no LCC-1 expansion. Note that 15,000 sqm of convenience retail floorspace from the

Lockerbie Principal Town Centre (LPTC) has been included in the analysis to represent the trade shadow that

it will have over the PSP Area centres network.

2.6 Modeliing Results

Figure 7. Impact of LCC-1 Expansion Gross Centre Turnover

Activity Centres No Expansion Expansion

Turnover$

(EssentialEconomics)Turnover$(MPA)

Turnover$(EssentialEconomics)

Turnover$(MPA)

PC 27,775,999 25,615,644 27,244,343 25,125,338

LTC-1 109,073,042 100,589,583 108,059,884 99,655,226

LTC-2 80,824,848 74,538,471 77,833,731 71,779,997

LTC-3 42,174,717 38,894,461 39,780,802 36,686,739

LTC-4 19,000,508 17,522,691 18,759,971 17,300,862

LCC-1 9,494,681 8,756,206 18,925,152 17,453,196

LCC-2 20,987,693 19,355,317 19,351,376 17,846,269

LCC-3 7,342,762 6,771,659 7,108,377 6,555,504

LCC-4 5,002,262 4,613,197 4,757,199 4,387,194

LCC-5 15,503,231 14,297,424 15,407,016 14,208,692

LCC-6 8,331,505 7,683,499 8,283,397 7,639,133

345,511,248 318,638,151 345,511,248 318,638,151

This table shows the calculated turnover per centre with and without expansion.



Figure 8. Impact of LCC-1 Expansion $ per SQM Turnover

Activity Centres No Expansion Expansion

$/m2

(Essential Economics)

$/m2

(MPA)

$/m2

(Essential Economics)

$/m2

(MPA)

LTC-1 9,089 8,382 9,005 8,305

LTC-2 10,777 9,938 10,378 9,571

LTC-3 9,372 8,643 8,840 8,153

LTC-4 9,500 8,761 9,380 8,650

LCC-1 9,495 8,756 7,570 6,981

LCC-2 8,395 7,742 7,741 7,139

LCC-3 7,343 6,772 7,108 6,556

LCC-4 10,005 9,226 9,514 8,774

LCC-5 10,335 9,532 10,271 9,472

LCC-6 8,332 7,683 8,283 7,639

This table shows the turnover per square metre of convenience retail floorspace under the MPA and

Essential Economics dwelling expenditure pool estimates (from Figure 4, Figure 5 and Figure 6 above).

Figure 9. Turnover Impact from Expansion of LCC-1

Centre Impact

PC -1.9%

LTC-1 -0.9%

LTC-2 -3.7%

LTC-3 -5.7%

LTC-4 -1.3%

LCC-2 -7.8%

LCC-3 -3.2%

LCC-4 -4.9%

LCC-5 -0.6%

LCC-6 -0.6%

This table shows impact of the LCC-1 expansion on other centres in the PSP Area network.



3 Statement

3.1 Retail hierarchy

Having considered the retail hierarchy in the exhibited Donnybrook and Woodstock PSP with reference to

the PSP guidelines, the allocation of retail floorspace appears generally justifiable given the geographic

considerations of the catchment. However, I have two specific observations:

1. There could be more (and more diverse) activity allocated to the two train station locations (LCC-2 and

LCC-3) given the relative efficiency of concentrating activity in locations with multiple modes of access,

in line with transit oriented development principles.

2. This a potential undersupply of convenience retail floorspace in the south west part of the PSP area

based on the application of the PSP Guidelines – and particularly the requirement for 80%-90% of

households having access to a supermarket within 1km of their dwelling (this situation is noted in the

Section 4.9 of the Essential Economics 2014 Report)

3.2 Principles for Retail Town Centre Locations

The principles for retail town centre locations set out in Section 4.8 of the Essential Economics 2014 Report7

state:

• Town centres and hubs of community facilities are located to maximise access to public transport

services. Principal and major town centres are located on the PPTN (both bus and routes and railway

stations) and local town centres are served by local bus services

• Local town centres are located on connector streets with direct access to at least one arterial road

• Accessibility of households to convenience shopping facilities, with MPA principles identifying a goal of

80%-90% of households located within 1km of a town centre of sufficient size to allow for the provision

of a supermarket

Generally, the network of activity centres proposed in the Donnybrook/Woodstock PSP adhere to these

principles. I note however that:

• LTC-1 is relatively distant from a train station

• Up to 1,000 households in Parcel 18 appear not to be within 1km of a supermarket as stipulated in the

Guidelines. This area is clearly underserviced for supermarket floorspace and the catchment for LCC-1

could also include populations from the English Street PSP Area and the employment node immediately

south of Donnybrook Road.

• LCC-1 has a significant catchment population to the south and south west and is within 800m walking

distance of the Donnybrook train station. It has the largest government school site in the PSP Area,

7 Essential Economics Regional Town Centre and Employment Land Assessment (PSP 1067 Donnybrook, PSP 1096 Woodstock, PSP 25.2 English Street) June 2014 Section 4.8 p46 8 Parcel 1 is in the south-west corner of the PSP Area incorporating MPA residential cells 12, 13, 14, 15 and 16. Refer to Metropolitan Planning Authority Donnybrook/Woodstock Precinct Structure Plan, November 2015, p12 – Plan 4 Land Use Budget; and p60 Section 4.1 Property Specific Land Use Budget



suggesting a future high school will be located there, which will promote regular and multi-purpose

trips to LCC-1 by multiple forms of transport.

• LTC-3 has a catchment that is constrained to the north by a large conservation area and is most

impacted by the trade shadow of the Lockerbie Principal Town Centre. The trade modelling shows that

the projected turnover for convenience retail at LTC-3 without the expansion of LCC-1 is $9,372 per sqm,

which is the lowest of the four LTCs in the PSP Area. LTC-3 has the advantage that it is close to the edge

of the PSP Area and this modelling underestimates its future trade potential from catchments outside

the PSP Area

• Similarly, both LCC-1 (Cheese Factory) and LCC-2 (Donnybrook Train Station) perform at a below

average levels in the analysis (around $7,500 per sqm turnover) because of their location on the edge of

the PSP Area. They have great potential to trade above these levels when expenditure from households

outside the PSP Area are taken into account

• Accounting for some additional expenditure capture from the English St PSP and Donnybrook Road

employment node in the catchment, LCC-1 is commercially viable at 2,500 sqm of convenience retail

floorspace.

3.3 Impact of Proposed LCC 1 Retail Expansion

The inclusion of an extra 1,500 m2 of convenience retail floorspace at LCC-1 up to a soft cap of 2,500 sqm is

supportable in commercial terms and to provide sufficient convenience retail amenity to households in

vicinity. The proposed expansion does not cause excessive impact on other centres in the

Donnybrook/Woodstock Precinct Structure Plan (PSP).

There is some deleterious impact on surrounding centres (as would be expected) if the floorspace is in

addition to the aggregate floorspace for the whole PSP, this is unlikely to be excessive. The largest impacts

are felt by LCC-2 (Donnybrook Station) to the east and LTC-3 (Lockerbie East Local Town Centre) to the north

at 7.8% and 5.7% respectively (Figure 9).

Neither of these impacts are excessive and are not expected to affect the viability of either centre.

This level of impact is within the normal range of competitive impact for a change on a retail network i.e. less

than 10% impact on any one neighboring centre.



3.4 Summary

There is a potential undersupply of convenience retail floorspace in the south west part of the PSP Area

based on the application of the PSP Guidelines – and particularly the requirement for 80%-90% of

households having access to a supermarket within 1km of their dwelling (this situation is noted in the

Section 4.9 of the Essential Economics 2014 Report).

The relative underdevelopment of the Donnybrook Train Station precinct (LCC-2) underpins the justification

for more substantial retail floorspace provision at LCC-1, given the proximity of the two centres.

The modelled level of impact in the PSP Area is likely to be lost in the ‘noise’ of other impacts such as brand

preferences, new retail models (Costco, Aldi, Lidl), and other macro-considerations.

An existing use resides at LCC-1 (the Cheese factory), which reflects the historical economy of the PSP area.

Expanding LCC-1 to include more convenience (including a supermarket) reinforces existing consumer

behavior patterns.

The LCC-1 site has excellent accessibility, it is close to existing arterial roads and located on a major

connecting road within the PSP.



4 Declaration

I have made all the inquiries that I believe are desirable and appropriate and no matters ofsignificancewhichIregardasrelevanthavetomyknowledgebeenwithheldfromthePanel

Michael Chappell

Managing Director

Pracsys Economics

9th May 2016



5 Attachment Curriculum Vitae

Level 3, Suite 162580 Hay Street, PERTH WA 6000

t (08) 9325 [email protected]

www.pracsys.com.au

Michael is Managing Director and founder of Pracsys Economics. A Chartered Management Consultant with a B.Econ (Hons) from UWA, Michael spent five years working in market and property research before beginning a career in Management Consulting in 1991. Michael has over 20 years of strategy consulting experience, augmented with formal training in Corporate Strategy Development through Stanford University.

With his professional background in quantitative economics and development planning, Michael has a strong record in the preparation of economic development strategies, economic impact statements, multiplier analysis, commercial development feasibilities and cost: benefit analyses. These skills have been applied to assignments in metropolitan and regional environments, for a wide range of private sector and government clients.

Michael has high-level skills in managing multi-disciplinary consulting teams, researching, writing and compilation of complex reports and tender proposals.

Pracsys Economics, (through Michael’s leadership) is recognised nationally for its work in Activity Centres, retail feasibility studies and policy assistance for State and Federal Governments.

His expertise and knowledge covers the following areas:

Urban Policy

• Metropolitan development policy

• Strategic industry mapping

• Activity centre policy development and performance assessment

Business Strategy

• Market research

• Strategic planning methods

• Innovation strategy

• New business development processes

• Management of strategy implementation

• Business performance measurement

Impact Assessment

• Multiplier effects of individual development projects

• Detailed dynamic spreadsheet models to assist in planning scenarios

Feasibility

• Detailed feasibility analysis and complex financial and statistical modelling

• Capital funding requirements and capital funding strategies

• Trading projections and operational plans for new facilities

• Management models and corporate governance structures

Economic Development

• Regional services and infrastructure planning

• Workforce and population projections

• Export industry development strategy

Michael is a member of various professional institutes including Institute of Management Consultants and the Australian Institute of Company Directors.

MICHAEL CHAPPELL BEcon (Hons) CMC MIMC

Managing Director