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Retail planning – the public interest should prevail in the pursuit of competition

One of the reasons Australian shopping centres are the best in the world is that the planning and zoning systems in place are the best in the world. Unfortunately, there is a constant ‘plea for exemption from following the rules’ by some developers. These rules don’t just safeguard orderly development, they have significant effect on the community as a whole, its infrastructure and ultimate wellbeing. Angus Nardi writes compellingly on the issue.

Here we go again.

There’s a new wave of retail planning reviews taking place in a number of jurisdictions (e.g. NSW, WA), egged on by some retail groups that claim they’re somehow unique compared to the rest of us, and therefore warrant differential (read: special) planning treatment.

The prevailing logic seems to be that if you’re a ‘new entrant’, ‘large format’, ‘big box’, ‘bulky goods’ and so on, the planning system just doesn’t get you and all of your tricky nuances.

According to a consultant report by one group, this includes “unique” features such as (wait for it) large sites and tenancy sizes, lots of easy car parking, truck access and loading facilities, exposure to passing traffic, big geographic catchments and concerns about costs to reduce pressure on margins.

There’s even reference to “emerging trends” such as technological advances and online purchasing.

If you’re like me and waiting for the ‘unique’ features to jump out and blow you away like an orange unicorn playing an electric guitar would, don’t hold your breath.

But apparently these characteristics mean that this type of retailing can be “differentiated from standard retailing” and is, hence, deserving of changes to the planning system.

When I say planning system, I mean both ‘spatial planning’ elements, such as activity centres policies, and ‘statutory planning’ elements, such as land-use definitions and zoning tables in terms of what’s permissible development and what’s not.

This claim of uniqueness is truly mesmerising because it is, of course, complete nonsense insofar as the above features could be considered distinctive or different when compared with so-called “standard retailing” such as shopping centres.

Now these issues might be legitimate points in their own right, but it’s a plain misuse of the English language and misleading to suggest any of this stuff is unique.

Remarkably, however, this platform can get a bit of traction with governments.

When it gets to the pointy end, what is really in the firing line for these groups is the longstanding ‘activity centres’ approach to planning that still prevails under every major metropolitan planning strategy across the country.
And it prevails for good reason.

This policy approach aims to concentrate retail in activity centres to act as the catalyst for other uses (e.g. employment, health, community) and to also optimise scarce public infrastructure such as public transport, roads and utilities.

Most government planning strategies have a hierarchy of activity centres starting from the CBD down to major and strategic centres (e.g. Parramatta) and local villages.

The desired outcome by retail groups asserting uniqueness is ultimately that structural change should take place which opens up locations in typically ‘out-of-centre’ areas, such as industrial, enterprise corridor or business park zones, for some types of retail development.

Depending on the planning system in place, this can be achieved through statutory planning changes such as zones and definitions, and even the use of the term ‘or’ instead of ‘and’.

Changes of this nature occurred in Victoria in 2012 and 2013, which also saw the lifting of retail floor-space caps in activity centres.

There’s even been a recent regulatory change in WA (outside the current formal policy review) which added new uses for bulky-good type centres, such as the sale of baby goods.

Fuelling this push for change is the big-ticket item leveraged by such groups, which is to deliver (again, wait for this unique morsel): competition.

The notion of competition in the planning system has been in vogue since the Australian Competition and Consumer Commission’s (ACCC) Grocery Price Inquiry of 2008.

The ACCC recognised that “zoning and planning policies are designed to preserve public amenity”.

But the ACCC also identified that some regimes, including activity centres policies, “act as an artificial barrier to new supermarkets”. The ACCC recommended (in relation to supermarkets) that governments should “consider ways in which zoning and planning laws… should have specific regard to” the impacts of proposals on competition including the facilitation of a new market entrant.

Since the ACCC’s report, competition in planning has been raised in various other inquiries and reports and, opportunistically, by anyone that wants to.

In certain cases, the notion of competition has also been used as a sole driver of a particular retail planning reform, often at the expense of spatial planning, possible externalities and (ironically) other competitors.

But despite what I think has been a one-sided approach to addressing competition issues in the planning system over recent years, hopefully a more comprehensive approach will prevail in the context of the current reviews.

This is because last year’s Harper Competition Report (chaired by economist Professor Ian Harper) has delivered the ‘final word’ on the issue.

I say the ‘final word’, because Harper is not only the latest landmark report on competition policy, but because it follows various inquiries and recommendations on retail and planning issues. This includes the ACCC inquiry and a number of subsequent Productivity Commission inquiries.

Harper identified planning as a priority reform area (along with shop trading hours) with its commentary focused on retail as opposed to other sectors.

So amidst 56 policy, law and governance recommendations, what did Harper recommend in relation to planning?

Harper recommended a ‘public interest test’ be applied, such that “the rules should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community as a whole outweigh the costs”.
This is both a sensible and excellent recommendation, even though it’s nothing really new in terms of public policy, and is akin to a cost-benefit analysis.

This was hence accepted by the Federal government as part of its response to Harper on 24 November 2015.

In other words, Harper suggests that there’s more to planning systems than simply competition, and there should not be a blind pursuit of competition at the expense of testing public interest issues.

Rather, competition should be pursued where it also meets the public interest and where costs don’t outweigh benefits.

This recommendation is also pleasing as it is similar to a recommendation we made in relation to retail planning policy through a report prepared by Sarah Hill, then from the consultancy Hill PDA. Our report recommended a ‘net community benefit test’ which could be applied to ‘in-centre’ and ‘out-of-centre’ retail proposals, looking at issues such as land availability, the net increase and types of jobs created, the costs and benefits on infrastructure demand and other externalities.

Aside from this public interest approach simply being about good planning, it could also be applied consistently and provide a level of fairness and certainty to all players – including those seeking differential treatment.

Sarah Hill has since been appointed as the CEO of the Greater Sydney Commission, which is chaired by Lucy Turnbull, so in the case of the current NSW retail planning review, it is hoped that the Government takes this approach on board.

The NSW Planning Minister Rob Stokes has also provided clear instructions to the Greater Sydney Commission around the importance of certain activity centres such as Parramatta, Campbelltown, Penrith and Liverpool.
This is a welcome directive and transparent approach by the Minister. We have always argued that governments should prioritise their efforts on growing and strengthening identified activity centres, including the facilitation of new retail floorspace

At least in NSW, it’s hard to imagine that the Minister would want to undermine these locations, and possibly other areas, with a structural shift in the planning system that would enable major ‘out-of-centre’ retail development.

Whether it’s NSW or WA, it should not be an outcome of these latest reviews that an unlevel playing field is created, or that shopping centre developments have more costs imposed on them than ‘out-of-centre’ developments.

For shopping centres, this can typically include costly and cumbersome process requirements, such as structure plans and retail need assessments, along with design requirements, infrastructure contributions and mixed uses.

In this respect, it would be concerning if these governments pursue and adopt lazy recommendations such as fiddling with zoning and definitions, which enables further ‘out-of-centre’ development and knowingly creates a system that undermines identified activity centres.

To help avoid this outcome, it is critical that claims about uniqueness from certain groups, and requests for differential planning treatment, are properly considered.

In addition, claims about retail trends as a rationale for major planning change should also be scrutinised.

Retail more broadly is certainly not static. ABS retail trade data tells us that the highest growth categories year-on-year (to April 2016) have chopped and changed across Australia whether it’s clothing and footwear, cafés and restaurants or household goods.

Government planners would be wise to note the introduction of food and restaurant precincts into shopping centres as a real live example of this retail dynamic, and also note that such innovation has been facilitated within the existing planning system.

The same goes for the integration into shopping centres of the new(ish) international apparel retailers which have large space and other requirements. Similarly, the growth of ‘non-retail’ uses being introduced into shopping centres, such as medical services, childcare and health and beauty, is an example of innovation and change which should be acknowledged.

Australia’s planning systems are not flawless, and there are challenges for various parties.

But, ultimately, governments should prioritise implementing their own plans and doing all they can to grow identified activity centres ahead of other areas. If not, it raises the question as to why they bother identifying these locations in planning strategies for future growth in the first place. These areas should be more than just dots on a map.

If the latest round of reviews in NSW and WA lead to the adoption of lazy recommendations that simply give a free-kick to ‘out-of-centre’ retail development, it will be nothing short of underwhelming and a slap in the face to shopping centre investors and, quite possibly, the public interest.SCN

About the author

Angus Nardi

Angus Nardi is the Executive Director of the Shopping Centre Council of Australia (SCCA), the national industry advocacy group for major owners, managers and developers of shopping centres. The group Chairman is Peter Allen, CEO, Scentre Group (owner and operator of Westfield shopping centres in Australia and New Zealand). The Deputy Chair is Greg Chub, Retail CEO, Charter Hall. The SCCA’s advocacy priorities include competition policy, retail tenancy legislation, land valuation and taxation, safety and security, energy policy and planning and development.

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