Market Analysis and Capacity Assessment

Edmonton Town Centre, Queensland

AECOM

June 2011 Ref:0008

Attachment No. 6 - Edmonton Town Centre Market Analysis and Capacity Assessment Report

Contents

Executive Summary ............................................................................................... i 1 Introduction .................................................................................................. 1

1.1 Scope ............................................................................................. 1

1.2 Strategic Considerations ................................................................ 2

2 Economic Impact Review ............................................................................ 3

2.1 Key Outcomes ................................................................................ 3

2.2 Critical Assumptions ....................................................................... 4

2.3 Implications for The Edmonton Town Centre ................................. 7

3 Economic Update ........................................................................................ 11

3.1 Tourism .......................................................................................... 11

3.2 Building Approvals ......................................................................... 12

3.3 Unemployment ............................................................................... 13

3.4 General Economic ImPlications ..................................................... 14

3.5 Population Growth Implications ...................................................... 15

4 Retail Scope and Timing.............................................................................. 16

4.1 Retail Assessment Assumptions .................................................... 17

4.2 Retail Need .................................................................................... 19

4.3 Retail Format .................................................................................. 20

4.4 Retail Staging Implications ............................................................. 21

5 Commercial analysis .................................................................................... 23

5.1 Cairns Commercial Market ............................................................. 23

5.2 Town Centre Bench marks ............................................................. 24

5.3 Commercial Forecasts ................................................................... 25

5.4 Commercial Assessment Assumptions .......................................... 26

5.5 Commercial Need .......................................................................... 28

6 Residential Demand .................................................................................... 29

6.1 Implications .................................................................................... 31

7 Staging Plan ................................................................................................ 32

Appendices

A. CICV Standard Terms of Business

i

EXECUTIVE SUMMARY

1. This report provides an updated economic analysis and market due diligence into the proposed staging and timing of the Edmonton Town Centre. Its outcomes are to assist defining deliverable land budgets and refining the town centre MasterPlan. In this regard the analysis is based on place making outcomes and activity centre network considerations which aim to deliver:

i. Multi-purpose trip generation; ii. Comparison shopping at the one location; iii. Support other uses including office, entertainment and community services; and iv. Higher housing densities.

2. The majority of the historical analysis for the corridor from a centres perspective was undertaken pre-GFC and

based upon residential development and population growth assumptions which have changed the current development landscape. As such, it is imperative that changes to development timing, take-up and the retail hierarchy within this area be considered for their impacts on Edmonton.

3. In this regard the report considers the implications of five key factors influencing the ETC project delivery, including:

i. Timing and status of the Mt Peter MasterPlan; ii. QLD Health resumption of 20ha of the subject site; iii. Retail supply additions; iv. Changes to residential take-up and population growth; and v. Wider macroeconomic and property market conditions.

4. In regards to retailing on the subject site, successful delivery early in a town centres lifecycle ensures delivery of

early community benefits, catalyst investment and a platform on which a mix of uses can be based. In this instance, getting the retail right at the ETC will help underpin the future successful delivery of complimentary employment land uses, public transport usage and increased residential densities. Successful retail is dependent on a strategic location, market demand and from a centre perspective a key anchor tenant. From a staging perspective key anchor tenants in the early stage of delivery are typically supermarkets, which if well located and timed, generate high levels of visitation, expenditure capture and strong returns for centre owners.

5. Analysis of market potential indicates that a full-line supermarket would be sustainable by 2015/2016. At this time, a full-line DDS allowing for the proposed Kmart at Mt Sheridan could also be sustained. In addition to these major tenants a range of mini-major and specialty tenants will be included as a part of the town centre. Typically these will contribute approximately 30-50% of the total tenancy floorspace mix.

6. Based on the retail modelling undertaken, the initial development catalyst stage of development should include

approximately 20,000sqm of core retailing, 5,000sqm of entertainment uses and 10,000sqm of small format bulky goods / niche showrooms. These showroom uses could form the basis of an interim uses strategy, supporting the development of the town centre, delivering early net community benefits before later transitioning into higher density and employment delivering land uses. Stage 2 of the development is ultimately dependent upon residential take-up however based on the revised population forecasts undertaken would be viable in 2025/26. This is likely to include an additional 20,000sqm of core retailing, 5,000sqm of bulky/showroom and an additional 5,000sqm in entertainment uses such as a tavern and a cinema complex. At completion it is envisaged that the ETC would contain approximately 40,000sqm of core retailing, 15,000sqm of bulky goods and 10,000sqm of entertainment uses. This represents approximately 40% of the total floorspace demand for the corridor at capacity, and allows for significant other retail opportunities including Cooper Road, Maitland Road, Gordonvale and additional convenience centres.

ii

7. In terms of office and community service opportunities the proposed delivery of the Edmonton Health Precinct is a

major employment generator and will go a long way to ensuring the ETC success as a mixed use node. In addition to this and based upon a demand led employment land model approach, the bottom line from a town centre office space requirement is a total demand at capacity for approximately 30,000sqm of commercial office floorspace on the ETC site.

8. From a staging perspective and based on our analysis of changes to the drivers of office demand we forecast that the ETC could support around 3,000sq m – 4,000sqm of office space by 2016/17. It is important that the amenity of the town centre is well established before commercial development proceeds. Having looked at successful suburban office precincts, as well as the critical mass required for an office precinct, we suggest that an initial stage of 3,000sq m of net lettable area (NLA) would be appropriate. Beyond this level of critical mass, the delivery of additional commercial floorspace will need to be driven by a range of factors including:

i. Government initiation or incentive ii. Cost driven (rents needs to be low enough to attract occupiers but high enough to be feasible for

development) iii. Lack of supply in the CBD (of the right size and quality) iv. Large pool of qualified labour v. Proximity to clusters of like or compatible industries (Hospital and health related demand) vi. Accessibility and amenity vii. Staff retention

9. The variety of retail and commercial catalyst uses identified for the site will deliver the amenity, access and economics to support a significant amount of residential development. The ETC site in particular is well suited to deliver a variety of dwelling types to meet this demand. Given the mix of uses that will be within a walkable catchment, it is particularly suited for medium/high density residential

10. Assuming current rates of underlying demand for medium/high density dwellings, there will be demand for an

additional 2,500 townhouses and apartments across the corridor. If the proportion of low density to medium/high density product was to mirror rates of underlying demand across the wider Cairns region, this demand would represent some 4,500 dwellings. In either scenario, the quantum of underlying demand for residential density is significant, and as previously stated, the ETC is ideally suited to satisfy some of this demand. The exact quantum of units for the site is constrained by the residual land area, however by analysing the proposed centre hierarchy for the southern corridor and assuming an unconstrained quantum of land it is reasonable to assume that the ETC could capture up to 25% - 30% of the base medium/high density dwelling demand; or approximately 600 - 750 dwellings.

11. In terms of staging, development feasibility constraints will dictate that the initial stages of residential will be medium density / townhouse type product of 15 – 40dwg/ per ha. As development increases and the ETC matures as an activity centre, underlying land values will increase and support the development of increased densities and ultimately replace interim uses at latter stages of development.

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1 INTRODUCTION

1.1 SCOPE

Colliers International has been engaged by AECOM to undertake a review of floorspace need and provide updated sustainable floor space modelling for the Edmonton Town Centre. The majority of the analysis for the corridor from a centres perspective was undertaken pre-GFC and based upon residential development and population growth assumptions which have changed the current development landscape. While short to medium term market fluctuations do not alter the long-term vision and quantum of floorspace from a planning perspective, they can affect project timing, staging and commercial viability. This report updates the capacity analysis and provides economic and market due diligence into the proposed staging and timing of the town centre, in order to assist in plan refinement, deliverable land budgets and sustainable development outcomes. It considers an activity centre hierarchy that encourages town centre development which delivers:

Multi-purpose trip generation Comparison shopping at the one location

Support other uses including office and community services

Higher housing densities adjacent to activity centres (which requires critical mass)

In preparing this report Colliers International has undertaken a detailed review of the key economic assumptions underlying the existing planning frameworks and provided updated sustainable floorspace modelling for the site. Key report formulation elements include:

Economic review

Detailed market due diligence

Up-dated capacity modelling

Development of appropriate land-use budgets

Staging, timing and implementation plan The information in this report has been obtained from, and opinions herein are based on, sources believed to be reliable. Although great care has been taken to ensure accuracy and completeness in this report, Colliers International has not independently verified and does not accept responsibility for its completeness and accuracy of the factual information on which its opinions and assumptions are based. Further, as the report involves future forecasts, it can be affected by a number of unforeseen variables. It represents for the party to whom or which it is addressed the best estimates of Colliers International, but Colliers International can give no assurance that any forecasts will be achieved.

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1.2 STRATEGIC CONSIDERATIONS

In addition to the macro–economic and GFC market effects, which relate to timing rather than quantum impacts, two further considerations need to be factored into the updated analysis;

1. Timing and status of the Mount Peter Master planning process; and

2. Queensland Health land resumption of 20ha of the subject site for a new hospital

Mt Peter MasterPlan

In November 2006 the then Cairns City Council resolved to undertake the master planning for the Cairns Southern Corridor (former name for the Mount Peter Master Planned Area), including the establishment of the Master Planning Taskforce. On 9 May 2008, the Deputy Premier and Minister for Planning formally declared Mount Peter a Master Planned Area in accordance with section 2.5B.3 of the Integrated Planning Act 1997 (IPA). This action required the Council to prepare a Structure Plan for the Mount Peter Master Planned Area in accordance with Schedule 1A of IPA. On 9 August 2010 Cairns Regional Council received a coordinated State agency response from the Department of Infrastructure and Planning (DIP) as part of the First State Interest Review. Council has now completed its review of the State interests and completed the required changes to the Mount Peter Structure Plan. The finalised Structure Plan for the Mount Peter Master Planned Area is due for completion in March 2011 (adoption by Council). The implications of the Structure Plan for the Edmonton Town Centre from a timing and capacity perspective needs to be considered in regards to residential land release and the sequencing of proposed district centres at Coopers Road and Maitland Road. Note that a recent peer review of the Mt Peter retail sequencing undertaken by Foresight Partners1 recommends:

... that development commences on the Maitland Road South site first so as to ensure that there is no adverse impact on the development of the Edmonton Town Centre into a Major Regional Activity Centre. This differs from the Draft Structure Plan which recommends that some development of the Coopers Road site occurs first.

Throughout the planning process, including the development of key background technical reports, the growth and development of the Mt Peter area has been a key driver of demand for the Edmonton Town Centre. In this regard, it is imperative that changes to development timing, take-up and retail hierarchy within this area be considered for their impacts on Edmonton.

Hospital Site Acquisition

Queensland Health as resumed 20ha of the subject site, including road easement across site for the future development of an additional public hospital. The hospital would ultimately be a significant generator of employment, a town centre investment catalyst and significant driver of retail demand. No development timing or scope for the future hospital has been indicated. Given the recent state investment of $446M in the redevelopment and expansion of the Cairns Base Hospital and the joint federal funding ($7.5M) of the Edmonton Super Clinic it is envisaged that health related demand will be satiated in the medium to long term across the area. These factors need to be considered when allocating and planning for social infrastructure provisions across the balance town centre area.

1 REVISED PEER REVIEW OF ECONOMIC DEVELOPMENT AND EMPLOYMENT STUDY, FORESIGHT PARTNERS; SEPTEMBER 2010.

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2 ECONOMIC IMPACT REVIEW

Colliers International has undertaken a review of the key documents and supporting needs assessments of relevance to the Town Centre. In addition to the Cairns Centres Planning Strategy (1998) and the Centres Planning Strategy – Review of Selected Aspects, 2001, two key reports have been identified which have underpinned the historical planning of the Edmonton Town Centre (ETC). These reports include:

MacroPlan Australia, Edmonton Town Centre, Economic Impact Assessment, 2007

Conics, Edmonton Town centre, Centre Assessment, October 2008

Both of these reports were market scoping studies for the Edmonton Town Centre, outlining the potential land use mix, quantum and timing.

2.1 KEY OUTCOMES

The MacroPlan report was written specifically for the subject site post completion of the 2007 Enquiry-by-Design, while the Conics report was authored in October 2008 and is the most up-to-date analysis of Edmonton Town Centre development opportunities. Key findings from these reports from a development scope and quantum perspective include: Figure 1: Proposed Retail and Commercial Budgets

Stage 1 Stage 2 RETAIL

MacroPlan

Core - 15,000sqm (2011) Bulky Goods – 10,000sqm(2011)

40,000sqm (at capacity: 2021)

Conics

Core – 20,000sqm (2011 – 2016) Bulky Goods – 10,000 – 20,000 (2009)

Core (45,000sqm) Bulky goods to be replaced by high density office and residential

COMMERCIAL

MacroPlan

n/a

62,170 sq m (2021)

Conics 40,000 sq m (2011 – 2016)

100,000 sq m at capacity

Source: KPMG (2006). MacroPlan (2007). Colliers International 2011. A detailed analysis of key assumptions and implications are outlined in the following sections.

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2.2 CRITICAL ASSUMPTIONS

Assumptions MacroPlan Conics Variability 1. Trade Area Delineation

No staging. Primary catchment

Immediate populations surrounding the subject site. Includes Mt Sheridan, east to Bruce Hwy, south to Peterson Rd and west to edge of urban development

Secondary catchment North

Bounded by Anderson Rd to the north, Foster Rd to the south, mountain range to the west and floodplain to the east.

Secondary catchment South

Represents the southern growth corridor and extends to include the township of Gordonvale. Area is currently undeveloped.

No Staging. Area 1

North of the Subject site covering the area north of Forester Road in Mt Sheridan and South of Anderson Road in Bayview Heights.

Area 2 Immediate population surrounding the subject site

including Bentley Park and Edmonton.

Area 3 The Mt Peter Study Area south of the subject site.

Area 4

Includes the towns of Goldsborough and Gordonvale south of the Mt Peter Study Area.

Conics have four areas of the catchment MacroPlan maintain the same MTA structure

throughout their modelling (i.e. no staging)

2. Trade Area Population Growth

MTA: 2001: 26,764 2006: 32,596 (4.02%) 2011: 39,788 (4.07%) 2016: 45,346 (2.65%) 2021: 50,303 (2.10%)

PTA:

2001:16,061 2006: 19,859 (4.34%) 2011: 24,556 (4.34%) 2016: 27,986 (2.65%) 2021: 31,045 (2.10%)

STA North

2001: 5,776 2006: 7,314 (4.84%) 2011: 9,262 (4.84%) 2016: 10,556 (2.65%) 2021: 11,710 (2.10%)

STA South

2001: 4,928 2006: 5,424 (1.94%) 2011: 5,970 (1.94%) 2016: 6,804 (2.65%) 2021: 7,548 (2.10%)

Cairns (C) Trinity

2001: 30,096 2006: 36,088 (3.04%) 2011: 40,930 (3.17%)

Total Area 2008: 37,352 2011: 42,318 (4.25%) 2016: 52,868 (4.55%) 2021: 61,568 (3.09%)

Area 1:

2008: 7,949 2011: 8,898 (3.83%) 2016: 8,791 (-0.24%) 2021: 8,686 (-0.42%)

Area 2

2008: 20,837 2011: 22,341 (2.35%) 2016: 24,879 (2.18%) 2021: 27,354 (1.91%)

Area 3

2008: 467 2011: 666 (12.56%) 2016: 6,129 (55.88%) 2021: 11,461 (13.34%)

Area 4

2008: 8,099 2011: 10,413 (8.74%) 2016: 13,068 (4.65%) 2021: 14,067 (1.48%)

Source: 2006 ABS Census, Conics

MTA for Conics as at 2011 was 42,318. For MacroPlan it was 39,788.

MTA for Conics as at 2021 is 61,568. For MacroPlan it is 50,303.

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2016:46,647 (2.65%) 2021:51,746 (2.10%)

Source: PIFU estimates revised upwards by MP

3. Retail spend per capita/ house hold

For 2005/06: PTA STA North STA South Supermarket $2,688 $2,859 $2,691 Restaurant/cafe $1,112 $1,171 $1,067 Clothing/access $1,160 $1,336 $1,002 Furniture/white gds $1,041 $1,183 $932 Electrical $852 $932 $673 Houseware/soft gds $573 $668 $521 Hardware $312 $344 $257 Sports/hobbies $478 $498 $402 Services $387 $386 $298 Newsagent/chemist $353 $402 $351 Bottle shop $641 $738 $647 Supermarket $469 $505 $421 Total catchment $10,066 $11,022 $9,261

Per h/hold Area 1 Area 2 Area 3 Area 4 Convenience $12,501 $12,243 $12,243 $11,985 Bulky Goods $5,657 $5,504 $5,504 $5,351 Clothing/access $1,885 $1,808 $1,808 $1,732 Food and Beverage $3,305 $3,225 $3,225 $3,146 Other $1,982 $1,908 $1,908 $1,833

MacroPlan use Market Info based on 2001 Census Conics use Market info based on 2006 Census and the 2003/2004 Household Expenditure Survey.

4. Market share

For proposed development: 2007 – 2016 Supermarket 21% Specialty 26% Bulky goods 8% Overall 13%

Market share averages CBD and Main Street – 10%-30% Regional Centres – 8% to 15% Sub- regional Centre – 13%-18% Supermarket Centres – 20% to 30% Convenience Centres – 8% to 15% Bulky Goods (Precinct and centres) – 20% to 30%

Conics market share for the ETC is a applied as a major regional activity centre of 21% to 33%t. It assumes a market share of the total trade area and is not staged.

5. Competition Existing Within the MTA

Mt Sheridan Plaza (7,620 sqm) and Piccones (2,500 sqm). Total retail floorspace of approximately 10,120 sqm.

Beyond the trade area

7 centres of various size. Total retail floorspace of approximately 179,267 sqm.

Approved Mount Sheridan Plaza to a 26,479 sq m

centre with an additional 4,030 sq m supermarket and 6,100 sq m DDS.

4,738 sq m centre anchored by a 3,200 sq m Coles in Edmonton opened in 2009.

3,193 sq m with a 2,523 sq m supermarket planned in Edmonton named Bentley Park Shopping centre.

6. Retail turnover density For proposed centre: 2006 Supermarket $8,966 DDS $4,500 Retail specialty $4,500 Total centre $5,691 Bulky goods $3,200

N/A

7. Staging and sustainable floorspace

No staging. Sustainable floor space for proposed development: 2011 Supermarket 4,000 Specialty 10,500 Bulky goods 10,000

No Staging Retail floor space demand for 2011: Area 1

Convenience: 19,268 Bulky goods: 6,153 Clothing & footwear: 2,050

MacroPlan’s short term forecast for sustainable floor space is 24,500 sq m for 2011 Conics floor space demand is assessed for t he total trade area rather than for the subject site. There is capacity for 84,643 sq m of retail floor space required in the trade are by 2011.

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Total 24,500

Food & beverage: 3,081 Other: 2,156

Area 2

Convenience: 13,136 Bulky goods: 13,779 Clothing & footwear: 4,527 Food & beverage: 6,922 Other: 4,776

Area 3

Convenience: 491 Bulky goods: 515 Clothing & footwear: 169 Food & beverage: 259 Other: 179

Area 4

Convenience: 6,324 Bulky goods: 6,589 Clothing & footwear: 2,132 Food & beverage:3,321 Other: 2,257

Total

Convenience: 25,779 Bulky goods: 27,036 Clothing & footwear: 8,879 Food & beverage:13,582 Other: 9,368

TOTAL: 84,643

8. Commercial office space Commercial floor space demand 2021: 20% Containment: 31,085 40% Containment: 62,170 60% Containment: 93,255

Commercial floor space Demand

2008: 74,705 2011: 84,636 2016: 105,736 2021: 123,136

Conics Containment Rate 80% assuming 15sq m per white collar worker. MacroPlan assumes 20 sq m per white collar worker

9. Conclusions 15,000 sqm of GLA possible at Edmonton Town Centre by 2011 The bulky goods component represents a further 10,000 sqm, mentioned within the report at 2011. Commercial office space at 2021 should be 62,170 sq m.

ETC should have 45,000 sq m of retail floors pace at capacity. ETC should include 10,000 to 20,000 sq m of bulky goods space. ETC should have 110,000 sq m of office space at capacity. 40,000 sq m of office space in initial development.

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2.3 IMPLICATIONS FOR THE EDMONTON TOWN CENTRE

Assessment and review of the key economic analysis documents for the Southern Corridor, highlights three (3) key issues relevant to the development and timing of the Edmonton Town Centre. Each of these are discussed in further detail following.

Retail Supply Additions

The MacroPlan (2007) report does not factor from a retail demand assessment perspective some of the more recent and significant retail additions, and whilst the Conics report acknowledged some of the more major planned additions it does not deal with potential impacts and implications on the proposed ETC. These additions are highly relevant to the Edmonton Town Centre, given both proximity to the subject site and the wider implications for the southern corridor retail hierarchy. The developments need to be factored into the retail modelling and sequencing plans for the ETC, and specifically include:

The recently constructed and opened neighbourhood centre (Coles Sugarworld); comprising 4,400sqm of retail

floorspace (including 3,200sqm Coles and 1,200 specialty) opposite the subject site

Extension and redevelopment of existing Piccones Shopping Centre, including a new 1,600sqm IGA, redevelopment of the existing supermarket, including addition of 342sqm of specialty and 732sqm tavern and bottle shop.

The approved Mount Sheridan Plaza expansion; comprising an additional 18,905sqm of floor space (inc. 14,500 retail). Major tenant additions include a Woolworth supermarket, K-Mart department store, mini major (The Reject Shop) and 38 additional specialty stores. Construction is set to commence in December 2011.

From a spatial perspective, the location of each of these supply additions is illustrated in Figure 2 below. Figure 2: Current Supply

Source: MapInfo 2010. Colliers International 2011.

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As illustrated, each the completed and approved retail additions are proximate to the ETC site. While the Sugarworld Coles and Piccones IGA additions are convenience based, servicing the local surrounding residential population, the addition of full-line discount department store at the Mt Sheridan Plaza effectively elevates its functionality, from a natural catchment perspective to a district/sub-regional role. This has direct implications on the natural trade catchment achievable at the ETC and ultimately the timing and staging of delivery. This will be analysed in more detail in Section 4. In addition to the above, it is important to note future pipeline projects that are currently not yet approved but mooted. These include the supermarket at Draper Road, Gordonvale where Woolworths have recently purchased a development site. More importantly, the planned district centres at Cooper Road and Maitland Road have significant implications on the viability and timing of the ETC. Given the approval at Mt Sheridan, the ETC will rely heavily on trade from the Mt Peter catchment and as such, appropriate sequencing and scoping of the planned district centres is imperative.

Trade Area Delineation

Given the retail additions outlined above, the trade areas utilised in both MacroPlan and Conics report have been revised to accommodate retail and employment floorspace staging. While the implications are relatively minor from a corridor wide capacity assessment, a more segmented trade area analysis including primary, secondary and tertiary areas is deemed to better reflect the trading reality and subsequently better inform ETC project delivery. Given the impending expansion and inclusion of DDS level retailing at Mt Sheridan, retailing within the Edmonton area will not draw significant market shares beyond Bentley Park until it develops the critical mass and retail and employment mix that is significantly greater and more diverse than Mt Sheridan. As additional stages of the development incorporating a mix of retail, entertainment and employment generators are delivered, such as the hospital, the trade area and employment catchment can be expected to expand. The timing of this is analysed in more detail in Section 4. A revised trade area acknowledging the recent and impending supply additions has been illustrated overleaf in Figure 3. Note that as residential development occurs to the south within the Mt Peter catchment, these initial release areas will become part of the ETC primary catchment until significant critical mass exists to deliver a retail offering at Coopers Rd.

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Figure 3: ETC Staged Trade Area

Source: Colliers International 2011.

Page 10 of 32

Population Projections In the MacroPlan report the assumed initial delivery and completion dates for Stage 1 of the ETC have passed. The reasons for this are no doubt numerous and not the subject of this paper, however poor market conditions and a lack of wider development industry momentum are no doubt partially responsible. This ’down cycle’ in project delivery has been prevalent across the wider development industry, including residential growth and development. The extent of this slow-down will be discussed in more detail in section 3, however the ultimate impact on the ETC is that population growth and residential take-up in the corridor has not occurred at the rates projected. The assumed rates of growth for the corridor and how they relate to the ETC have been outlined in Figure 4 below. Figure 4: Population Growth Assumptions

2006-2011 2011-2016 2016-2021 MacroPlan MTA 4.07% 2.65% 2.10%

Conics 4.40% 4.55% 3.09%

PIFU Trinity SLA 3.17% 2.65% 2.10%

Source: Colliers International 2011. As illustrated both the Conics and MacroPlan reports applied stronger rates of growth for the 2006 to 2011 period based on observed rates of growth at the time. Post-2011 MacroPlan applied PIFU forecasts for the period to 2021, while Conics assume continued strong rates of residential development. Based on the above rates of growth the Conics forecast assumed an annual household formation3 rate of approximatley 550 homes and the MacroPlan analysis, a household formation rate of 480 per annum. Analysis in section 3.5 illustrates that these levels of household formation, based on analysis of new dwelling approvals and land sales in the southern corridor while readily acheived in the 2005-2007 period, have not been acheived since. While the ultimate population for the Mt Peter corridor remains as planned, the short to medium term implications of a cyclical downturn for the southern corridor has been delayed take-up and hence delayed retail and commercial demand. The implications of reduced population growth rates in the short-to-medium term from a development timing perspective will be analysed in more detail in Section 4.

3 BASED ON HISTORICALLY OBSERVED HOUSEHOLD SIZE RATIOS FOR THE TRINITY SLA; AT 3.0 PERSONS PER DWELLING.

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3 ECONOMIC UPDATE

The Cairns economy experienced a tough year during 2010 which has largely carried into the first half of 2011, with the world wide slowdown in tourism due to the state of global economic conditions and the impact of natural disasters affecting the local tourist industry and the economy generally. Similarly the Cairns residential building and unit development industries which contributed to a buoyant economic situation in recent years have also experienced a slowdown in activity with no new substantial private sector projects being brought to market. Together these factors led to a large increase in the unemployment rate within the Cairns region, which peaked at 13.8% in September 2009. While the number of jobs in the region increased considerably over 2010, the lack of construction together with the flow-on effects of Cyclone Yasi continues to show effect in 2011.

3.1 TOURISM

The Tourism Industry is a major component of the Cairns economy, and whilst domestic tourist visitation to Tropical North Queensland held up well during the economic downturn, the number of international tourists visiting the Far North Queensland tourism region has been less resilient than their domestic counterparts. Passenger numbers at the international terminal to March 2011 have struggled to maintain the levels that were achieved during 2010 and are on a reducing trend. International passenger numbers are likely to remain soft due to a reduction in tourist numbers from Japan following the earthquake and tsunami and the surge in the Australian dollar. Figure 5: Domestic and International Visitors to Far North Queensland, 1999/00 to 2009/10

Source: Tourism Research Australia. Colliers International 2011.

0

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2,000,000

2,500,000

1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10

Num

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f vis

itors

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3.2 BUILDING APPROVALS

Building approval figures for the Cairns urban area continue to languish, with latest figures showing only 22 new houses and no new units approved in April 2011, down significantly on the long-term average and back to a level not vastly different from the GFC-affected lows of January- February 2009. There have been no new units approved in Cairns City since July 2010. Historically, Cairns experienced a sharp increase in number of residential building approvals in 2006-2007 with total number of building approvals reaching approximately 2,500, before a sharp decline in 2008 – 2009 to 784 (remaining approximately one third of approvals during 2006 – 2007). Building approvals again started to increase gradually during 2009 –2010 reaching approximately 953. Figure 6: Number of Residential Building Approvals in Cairns

Source: ABS, Colliers International 2011. Cairns Trinity4 makes up an average of approximately 30% of total building approvals in Cairns. Cairns Trinity experienced the similar trend during 2006 – 2007 with number of building approvals reaching approximately 913 before declining to approximately 229 during 2008 – 2009. Figure 7: Number of Residential Building Approvals in Cairns Trinity

Source: ABS, Colliers International 2011.

4 CAIRNS (C) - TRINITY (STATISTICAL LOCAL AREA) – INCLUDES AREAS BETWEEN WOREE IN THE NORTH AND GORDONVALE IN THE SOUTH.

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3.3 UNEMPLOYMENT

An uncertain outlook and weaker business sentiment over the past few years has contributed to subdued economic activity, low levels of employment growth and rising levels of unemployment. In the year to October 2010, the number of employees in Far North Queensland rose by 7,800 to 141,600. However, there has been a significant impact from the recent weather and the downturn in tourism caused by the strength of the Australian dollar. This has seen employment numbers fall dramatically by 12,585 to 129,100. Figure 8: Employment in Far North Queensland, Nov 2007 - Mar 2011

Source: ABS, Colliers International 2011. Unemployment in Far North Queensland increased from 4.3% in August 2008 to 12.4% in February 2010, however over the past seven months the unemployment rate has declined substantially and was recorded at 6.9% for October 2010 (refer Figure 9). The unemployment rate is incredibly volatile to market conditions as in March 2011 unemployment stood at 10.6%, mainly due to recent weather activity and the continued downturn in tourism in the region. In the near term, we expect there to be growth in employment in the construction services as rebuilding of cyclone damaged areas begins. Activity in the private sector is expected to strengthen due to rising business investment and moderate levels of consumption growth, which combined should lead to stronger employment growth.

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Page 14 of 32

Figure 9: Unemployment in Far North Queensland, 2007-10

Source: ABS, Colliers International

3.4 GENERAL ECONOMIC IMPLICATIONS

Understanding the local market and its positioning within the broader economic cycles is a critical input to project staging. In this regard, key findings from the economic analysis include;

Whilst the Australian economy remained highly resilient, a period of slow and gradual recovery is expected

The Cairns economy has slowed significantly, given a heavy reliance on a depressed tourism, construction and property industry

Despite the buffering effects of the FHOG, residential building activity has decreased significantly over the past

12-18 month period, with the average monthly dwelling approvals down -30% to -40% from the long term average.

Unemployment rose significantly to almost 14% on the back of high levels of employment vulnerability in the region; and while job growth gained some momentum over 2010 year to date, they have again been impact by the impact of flooding and Cyclone Yasi.

Tourism numbers remain resilient on the back of continued domestic demand, however international demand has

reduced.

In terms of the property cycle, Colliers International sees the Cairns market approaching if not at the bottom of the cycle.

General consensus would suggest that the economy now appears to have been through the worst of the downturn and is on a slow recovery path. Extra confidence has also arisen from the introduction of additional air services into Cairns earlier this year, which increased total inbound seat capacity by approximately 15%. Nevertheless, the Cairns economy is continuing to lag the national economic recovery and we expect relatively soft economic conditions to remain in place in Cairns for the remainder of 2011. Going forward, job generating major projects remain a key component of any economic recovery, with the Edmonton Town Centre site strategically positioned to help meet this end

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Page 15 of 32

3.5 POPULATION GROWTH IMPLICATIONS

The implication of increasing unemployment and decreased construction activity is decreased new housing demand and reduced population growth. This is critical for the timing of Greenfield / fringe urban town centres such as Edmonton. In order to recast retail demand projections and development timing, an updated review of population growth to-date and revised projections need to be undertaken. In this instance, analysis of the most recent population growth has been based on Estimated Residential Population statistics prepared by the ABS for the Trinity Statistical Local Area (SLA). The current ERP estimates undertaken by the ABS are based on 2006 Census data and updated based on changes in dwelling approvals, Medicare enrolments and counts of people on the Australian Electoral Roll. This data is illustrated in Figure 10, showing significantly reduced population growth post the peak in 2007. Going forward Colliers has undertaken near term projections based upon, a range of inputs including: Timing for completion of the Mt Peter MasterPlan; Historical analysis of the relationship between building approvals, new lots sales and household formation; Cairns property trends and cyclical growth rates; and Analysis of the lot production pipeline. The projections are illustrated in Figure 10 below. These figures will form the basis of revised retail demand modelling in the following section. Post 2016 analysis of trunk infrastructure for the Mt Peter area5 and PIFU and forecasts will be utilised. Figure 10: Short-Medium Term Population Forecasts

Source: ABS, Colliers International

5 MOUNT PETER MASTER PLANNING PART 4 – TRUNK INFRASTRUCTURE REPORT APPENDIX A: GROWTH AND SEQUENCING

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2002 2003 2004 2005 2006 2007r 2008r 2009p 2010p 2011p 2012p 2013p 2014p 2015p 2016p

ABS ERP DATA COLLIERS INTERNATIONAL FORECASTS

Page 16 of 32

4 RETAIL SCOPE AND TIMING

The challenge for the Southern Growth Corridor is to consolidate and grow appropriate retail formats across a distribution of centres that encourage mixed activity and minimise the number of private vehicle trips out of the areas to access services which could and should be provided locally. It is critical therefore to consider a retail hierarchy that encourages town centre development which delivers:

Multi-purpose trip generation Comparison shopping at the one location

Support other uses including office and community services

Higher housing densities adjacent to activity centres (which requires critical mass)

This section of the report provides an updated analysis of the existing and forecast supply and demand conditions within the region in order to assess the quantum, mix and staging of sustainable retail floor space in the area. The model used to quantify and update the understanding of retail demand for the Edmonton Town Centre is outlined below. Figure 11: Retail Assessment Model

Source: Colliers International 2010.

Trade Area Delineation

•Analyse exisiting actual trading patterns with exisiting competitive framework

•Define trade area based on a range of convenience and accessibility factors

Population

• Quantify growth in population in the trade area as the primary driver of increased retail demand

• Assess and test estimations and projections are relevant and realistic to the trade area

Customer Analytics

• Who are they, what do they demand, how do they shop and how much do they spend.

• Project per capita retail spends over the analysis period

Compettive Framework

• Assess total quantum and mix of retalining on the ground and in the pipeline?

•Confirm performance KPI's

Need and Viability

•Forecast retail need

•Quantify mix and timing

Delivery

•Test outcome for commercial viability

•Outline stagining and implementation stratgey

Page 17 of 32

4.1 RETAIL ASSESSMENT ASSUMPTIONS

1. Trade Area Delineation

The trade area catchment used in the assessment of market potential for the ETC is illustrated in Figure 3. This trade area is driven by convenience and need, acknowledging the recent and impending supply additions at Coles Sugarworld, Piccones and Mt Sheridan Plaza. It also considers typical accessibility factors including:

Road networks and traffic flows; Natural and man-made physical boundaries such as rivers, rail, freeways etc; Co-location with higher order facilities and/or services Level of employment and journey-to-work patterns; and Population distribution

2. Population Growth

Assumptions

The population forecast used in the analysis include:

- Short-term (2010-2016) - Colliers International projections outlined in Section 3.5

- Long-Term – PIFU and growth and sequencing data from the Mt Peter Master Planning Pt4 – Trunk Infrastructure Report.

3. Customer Analysis

Analysis of per capita retail expenditure characteristics of trade area residents is based on MarketInfo data developed by MDS. This data has been generated by combining and updating data from the Population Census and the ABS Household Expenditure Survey (HES) on a micro level, using micro simulation modelling techniques. That data is based upon the 2006 Population Census and the latest Household Expenditure Survey 2003/2004. The data is benchmarked and updated to the Australian National Accounts and dollar values inflated to 2010 dollars. No allowance has been made for inflation in forecasting future retail. However a small increase of 1% per annum has been factored into the expenditure estimates to reflect expected real increases accruing in household spending over this period.

4. Competitive Supply

Based on floor space audits undertaken by Colliers International in November 2010.

5. Need and Viability

A trade area aggregate demand approach has been undertaken, so that a detailed understanding of people movements, expenditure flows and ultimately floor space distribution can be assessed. The advantage of analysing demand from a net oversupply/undersupply perspective is that from a catchment perspective, negative impacts are avoided because growth in floor space need is in-line with population growth and threshold triggers. Retention potential and sales productivity levels based on analysis of expenditure retention, escape expenditure and sales levels achieved at comparable locations. Data sourced from Colliers International internal databases, UrbisJHD retail averages and background reports analysed in Section 2 of this report. Market Potential is the net aggregate demand based on the difference of total sustainable floor space and existing supply by retail category. Market potential by category has been tested against realistic market shares achievable at the relevant store categories.

Page 18 of 32

Figure 12: ETC Trade Area Retail Assessment

Source: Colliers International 2011.

Page 19 of 32

4.2 RETAIL NEED

From a trade area demand perspective the fundamental bottom line from a net supply/demand perspective is that there is currently a retail supply of 21,375sqm across the total study area and a total market potential (assuming some retention of the current high levels of escape expenditure) of approximately 56,700sqm. This level of market potential allows for continued escape expenditure of higher order shopping to other major sub-regional and regional centres (including the Earlville and Cairns CBD). The result is a current shortfall across the trade area of some 40, 000sqm of retail floor space. Note though the expansion of Mt Sheridan Plaza does absorb a proportion of this need on its assumed opening in 2013. This is illustrated in Figure 13 below. Figure 13: Aggregate Retail Demand

Source: Colliers International 2011. Based on the continued infill in Edmonton and residential take-up at Mt Peter, additional floorspace demand across the study area going forward equates to approximately;

2015 – 30,000sqm

2020 – 40,000sqm

2030 – 65,000sqm; and 100,000sqm at capacity.

Mt Sheridan Plaza Expansion

Page 20 of 32

Note that the quantum outlined above also includes additional potential floor space at Gordonvale, and the planned centres within the Mount Peter Area. As such, in order to ensure the commercial viability of the ETC, strategic timing and sequencing of additional retail within the Mt Peter area needs to be carefully considered.

4.3 RETAIL FORMAT

It is impossible to forecast the exact future composition of retailing in the southern corridor and the ETC, as new retail concepts will continue to evolve over time. Many of the retail concepts that exist in the Australian retail environment now, such as super regional centres, dedicated bulky goods centres, factory outlets etc did not exist 20 years ago. Over the period to 2020 however, more certainty exists to the type of tenants that will be available for expansion of retail facilities. In particular, one of the key components of any future retail expansion within the ETC trade area will be the addition of further supermarket floorspace. In terms of major grocery offers, the trade area is currently served by one full line Coles at Edmonton, and three IGA’s located at Piccones, Centenary Marketplace and Gordonvale. Note that while outside of the trade area, the proposed full-line Woolworths at Mt Sheridan Plaza will generate visitation and market share from ETC trade area residents. Total supermarket floorspace within the trade area is equal to approximately 13,500 sqm. This provision currently serves a population of some 30,317 residents. As such, supermarket floorspace provision is approximately 323 sqm per 1,000 persons, which is slightly lower than the Queensland average of 350 sqm per 1,000 persons. The lower supermarket provision confirms the demand for additional supermarket floorspace outlined in Figure 12, and would support the strong trading performance at existing supermarkets within the corridor. Given the high population growth, the supermarket floorspace requirement increases significantly, clearly indicating the potential for further supermarket floorspace in the future. As illustrated in Figure 12, the level of additional supermarket floorspace required is approximately 7,300sqm by 2020. Based on full-line offerings of 3,000 – 3,500sqm this equates to an additional two supermarkets. Given the existing provision, this is likely to include at least one major supermarket (Woolworths) and potentially a secondary offering such as an Aldi at the ETC. In addition to supermarket floorspace, the ETC is likely to contain a discount department store (DDS). In Australia, there is typically one major discount department store (6,000 – 8,000sqm) provided for every 40,000-45,000 residents. In non-metropolitan region, such as Cairns, the provision is generally one store for every 30,000-35,000 residents. Given a capacity population of approximately 95,000 persons at capacity within the defined region indicate that 3 discount department stores would be supportable in this area. Given the impending development of a full-line Kmart at Mt Sheridan, which is likely to draw up to 50% of its DDS trade from the ETC trade area, one full-line DDS, such as Big W or Target would be recommended for the ETC site in the initial stages. Timing and staging of the development will be discussed in the following section The addition of both discount department store and supermarket floorspace will attract further food and non-food specialty shops, who will co-locate with the DDS and supermarkets, feeding off the customer flows generated by these tenants. Furthermore, small bulky goods/homemaker showrooms should be added as extension of the town centre to deliver a range of interim uses and catalyst development opportunities, ultimately supporting larger free-standing homemaker centres at more appropriate locations. From the above, it is clear that there will be significant demand for a wide range of retail facilities with the major tenants being discount department stores and supermarkets. The timing of these types of facilities is discussed in the following section.

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4.4 RETAIL STAGING IMPLICATIONS

Successful delivery of retail early in a town centres lifecycle ensures delivery of early community benefits, catalyst investment and a platform on which a mix of uses can be based. In this instance, getting the retail right at the ETC will help underpin the future successful delivery of complimentary employment land uses, public transport usage and increased residential densities. Successful retail is dependent on a strategic location, market demand and from a centre perspective a key anchor tenant. From a staging perspective key anchor tenants in the early stage of delivery are typically supermarkets, which if well located and timed, generate high levels of visitation, expenditure capture and strong returns for centre owners. Analysis of market potential indicates that a full-line supermarket would be sustainable by 2015/2016. In this case the operator is likely to be Woolworths give the new Coles located opposite the subject site and a new Supa IGA at Piccones. At this time (2015/2016), a full-line DDS allowing for the proposed Kmart at Mt Sheridan could also be sustained. In addition to these major tenants a range of mini-major and specialty tenants will be included as a part of the town centre. Typically these will contribute approximately 30-50% of the total tenancy floorspace mix. The recommended staging for the retail component of the ETC is outlined below. Figure 14: ETC Recommended Retail Staging

2015/16 2025/26

Edmonton Town Centre Stage 1 Stage 2 Total Centre

Supermarket 4,000 4,000 8,000

DDS 7,500 7,500 15,000

Mini-major 2,500 2,500 5,000

Specialty 6,000 6,000 12,000

Bulky Goods 10,000 5,000 15,000

TOTAL 30,000 25,000 55,000

Entertainment (Cinema / Tavern)

5,000 5,000 10,000

Source: Colliers International 2011. The initial development catalyst stage of development should include approximately 20,000sqm of core retailing and an addition 10,000sqm of small format bulky goods / niche showrooms. These showroom uses could form the basis of an interim uses strategy, supporting the development of the town centre, delivering early net community benefits before later transitioning into higher density and employment delivering land uses. Stage 2 of the development is ultimately dependent upon residential take-up however based on the population forecasts undertaken would be viable in 2025/26. This is likely to include an additional 20,000sqm of core retailing, 5,000sqm of bulky/showroom and an additional 5,000sqm in entertainment uses such as a tavern and a cinema complex.

Page 22 of 32

At completion it is envisaged that the ETC would contain approximately 40,000sqm of core retailing, 15,000sqm of bulky goods and 10,000sqm of entertainment uses. This represents approximately 40% of the total floorspace demand for the corridor at capacity, and allows for significant other retail opportunities including Cooper Road, Maitland Road, Gordonvale and additional convenience centres.

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5 COMMERCIAL ANALYSIS

The retail staging outlined in the previous section is based on delivery of a retail hierarchy that encourages successful town centre development at the subject site. As previously discussed, critical components of this success include:

Multi-purpose trip generation Comparison shopping at the one location

Support for other uses including office and community services

Higher housing densities adjacent to activity centres (which requires critical mass)

In terms of office and community service opportunities the proposed delivery of the Edmonton Health Precinct is a major employment generator and will go a long way to ensuring the ETC success as a mixed use node.

5.1 CAIRNS COMMERCIAL MARKET

Prior to discussing other opportunities it is important to understand the broad hierarchy of commercial floor space as it exists in Queensland and Cairns. Across Cairns there are three key forms of office accommodation:

In Centre or City Centre office (principally provided as multi-tenant office developments in activity centres) mainly confined to the Cairns City Centre.

Out of Centre Campus style office: Mainly provided on Business Zoned land in business parks (there is limited supply of this product in Cairns but it is emerging)

Out of Centre Ancillary office: Provided to accommodate management and administrative functions of manufacturing and distribution companies on Industrial Zoned land

The Cairns office market is almost totally CBD centric. There is an estimated 150,000 sq m of office space located in the cairns CBD, with some periphery offices located in Earlville, Westcourt and Edmonton in suite accommodation. Government is the major occupier of office space in the region followed by mining companies, solicitors and financial advisors. Government generally occupy larger floor plates. However, the average for the Cairns CBD is between 200-300 sq m. During 2007-08 the Cairns CBD saw a number of new office buildings commence construction, including the $79.5 million State Government office tower with 9,500 m2 of lettable area. These have largely been completed and are mostly fully let. This has resulted in the addition to the market of a number of quality buildings with 4 star green ratings. Since the State Government office tower has commenced occupation, there has been an increase in vacancy levels in backfill space. Whilst this is mainly secondary space, there is likely to be continued downward pressure on secondary rents, and the potential emergence of incentives. It is however considered that modern, good quality office buildings will remain in high demand and sustain existing rental levels. Gross effective office rents in Cairns have remained stable since the market peak; when prime rents reached around $350/m2 per annum, up from around $275/m2 in early 2007. While the softer market conditions have eased upward pressure on rents, there does not appear to have been any significant fall in rents.

Page 24 of 32

It is estimated that there is a good four years of supply of commercial floor space in the Cairns CBD. As a result of back fill from new builds and the number of businesses entering receivership due to the current market conditions. The outlook for the Cairns office market is for stable market conditions for quality buildings, which will remain in demand. However increased vacancies in secondary backfill space are expected to occur over the short term, once the State Government office building is occupied. In regards to the ETC, the assessment of potential demand for commercial office at the ETC is a difficult one as there is no clear and convincing methodology to do so. Typical white collar employment forecasting and retention targets while appropriate for strategic planning purposes, often fail to capture the reality of an emerging centre located in CBD centric hierarchy. In this environment commercial demand is likely to be both opportunistic, ad-hoc and constrained by development feasibility parameters. In this instance a range of benchmarks have been analysed in order to provide some insights into the ultimate commercial land use mix at the ETC.

5.2 TOWN CENTRE BENCH MARKS

The most comparable town centres in regard to size and distance to a metro centres are Smithfield to the North of Cairns and North Shore Townsville located 15km north of the Townsville CBD. Each centre has less than 5,000 sq m of planned commercial space allocated in their master plans. Robina, Springfield and Rouse Hill all have significantly larger catchment populations to draw from and have larger commercial office space requirements. Figure 15: Benchmark Summary

Smithfield North Shore Townsville

Robina Springfield Rouse Hill

Distance to Metro Centre

15km

15km 85Km 29km 35km

Town Centre - 65ha 90ha 320ha 22ha

Retail 22,098 (85%)

60,000 (88%)

85,000sqm (56%)

192,000sqm (22%)

183,000sqm (65%)

Commercial 4,035sqm

(15%) 4,000sqm

(6%) 45,000sqm

(29%) 200,000sqm

(23%) 17,000sqm

(6%)

MU/Residential -

-

150 units (12%)

2,500 units (34%)

600 units (25%)

Entertainment / Hotels

-

4,500sqm (7%)

5,000sqm (3%)

16,900sqm (2%)

10,000sqm (4%)

Other -

- -

158,000sqm (18%) health -

Total 26,133sqm 68,500sqm 153,000sqm 887,000sqm 283,000sqm

Source: Smithfield Town Centre Economic Analysis, AEC Group 2010. Colliers International 2011. As illustrated in Figure 15, the ultimate land use mix at each of the benchmark centres is considerably different, with the proportion of commercial floor space representing between 6% and 29% across the range.

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A key finding from the analysis was that developers need to incorporate a degree of flexibility in terms of the types of tenants targeted to establish a significant quantum of commercial within the Town Centres. In these cases non-traditional/ less established commercial office locations are often subject to or influenced by;

Unanticipated events such as changes in organisational or Government policy (eg. regionalisation/decentralisation of users, new infrastructure, Local Council amalgamation)

Competition from other centres with similar or better attributes for particular occupants; and

Ad-hoc enquiries driven by perceived opportunities for investment/occupation

5.3 COMMERCIAL FORECASTS

With this in mind, Colliers International have utilised a demand led employment land model to identify the future office floorspace and land requirements in the Edmonton Town Centre, where projections of commercial workers, based on population growth, have been used to identify the potential commercial floor space requirement. The methodology is outlined in more detail in Figure 16 below: Figure 16: Commercial Assessment Model

Source: Colliers International 2011.

Trade Area Delineatio

n

•Analyse exisiting employment centres and nodes

•Define trade area based on labour force and accessibility factors

Population

• Quantify growth in population in the trade area as the primary driver of increased commericial office demand

• Assess and test estimations and projections are relevant and realistic to the trade area

Labour Force

• Who are they, and what industry do they work in?

• Project working age population and particpation rates

•Determine Full time and part time employee ratios

•Projcet full time white colar employment in office accommodation

Self Conatainm

ent

• Determine achievable self containment levels from benchmarks

•Determine average floorspace per employee from industry bench marks

Need and Viability

•Forecast commercial need

•Quantify requirment and timing

Delivery

•Allocate floor space/land demand accross the stucy area

•Outline staging and implementation stratgey

Page 26 of 32

5.4 COMMERCIAL ASSESSMENT ASSUMPTIONS

1. Trade Area Delineation

The employment catchment utilised is defined as the total trade area used within the retail trade analysis, including the primary, secondary and tertiary trade areas.

2. Population Growth

Assumptions

As per retail analysis assumptions

3. Working Pop and Labour

Force

Working population is defined by the ABS as the population between 15 to 64 years of age. Approximately 79% of population in the MTA is defined as working age. Based on the participation rate of employees in the Cairns Region 69% are in full time employment compared to only 31% part time employees.

4. Commercial Employment

White collar workers are defined as those persons employed in the following industries (based on ABS - Australian and New Zealand Standard Industry Classification).

Information media & telecommunications Financial & insurance services Rental, hiring & real estate services Professional, scientific & technical services Administrative & support services Public administration & safety Arts & recreation services

In 2006, the share of persons employed in white collar jobs was estimated at 27.7%. In the City of Cairns, white collar employment has trended upwards over the past 10 years, however, has been impacted negatively due to recent economic conditions. This is projected to have minimal growth over the projected time frame of development. It is estimated that only 40% of all white collar jobs require investment grade town centre office space in the Cairns Region. This estimation is based on the current benchmark of office floor space currently delivered in the Cairns Region as a proportion to the population of white collar workers. White collar employment containment in the MTA is expected to be staged over the time frame of the development. It is currently estimated to be only around 3% to 5% as there are few opportunities currently in the MTA. This is expected to increase in-line with development activity of retail, infrastructure, and commercial space. We can assume containment rate of 20% on delivery of Stage 1 retail (2015/2016), increasing to 30% on delivery of Stage 2 retail (2025/26) and the adjacent hospital and 40% self-containment at capacity. It is estimated that the ETC will attract 90% of all white collar office employment from the MTA. Currently it is estimated that there is minimal inflows of white collar employment due to insignificant levels of commercial office floor space located in the MTA. This is expected to increase in-line with the development of the ETC. We assume that there will be an office employment in-flow of 10% by 2030.

Office Floorspace Requirement

This assessment has used a benchmark of 20sqm per white collar job, based on benchmark employment yields analysed at comparable suburban / fringe office developments.

Page 27 of 32

Figure 17: ETC Trade Area Commercial Assessment

Source: Colliers International 2011.

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5.5 COMMERCIAL NEED

From a demand led employment land model perspective the bottom line from a town centre office space requirement is a total demand at capacity for approximately 30,000sqm of commercial office floorspace on the ETC site. From a staging perspective and based on our analysis of changes to the drivers of office demand we forecast that the ETC could support around 3,000sq m – 4,000sqm of office space by 2016/17. Having looked at successful suburban office precincts, as well as the critical mass required for an office precinct, we suggest that an initial stage of 3,000sq m of net lettable area (NLA) would be appropriate. Based on current demand the type of occupiers that would take up occupation in these initial stages would likely be small units of 200sqm-300sqm, that are self contained and do not need to be in clusters, such as

Professional services located currently in secondary office accommodation: Professional services firms include accountants, financial planners, lawyers etc. We consider that this should be the main focus to attract tenants;

Home based businesses: it is likely that some home based businesses located within a 5km -10km radius of the site would be interested in the development. Many of these businesses will have grown out of their existing space and are now looking for a more professional environment and an upgrade of their image;

Businesses associated with industrial occupiers: it is likely that the significant amount of industrial occupiers would generate some office demand; and

Businesses associated with the construction industry in Mt Peter: it is likely that some companies involved in the significant construction within the Mt Peter corridor, such as home builders, would like a local presence.

From a design perspective, Colliers International would recommend that a separate office building is developed, rather than shop-top or within a shopping centre or residential building. Based on reporting by Colliers International suburban leasing agents, the most important driver for suburban occupiers moving into new space is the ability to develop a corporate identity. Many potential occupiers are already located in shop top office space which is readily and cheaply available in most suburban locations. New office space in a purpose built building is generally unavailable so provides a strong point of difference to the space that is already there. The office building should be located close to the ETC retail core being developed so that tenants can utilise this amenity. Beyond this level of critical mass, the delivery of additional commercial floorspace will need to be driven by a range of factors including:

Government initiation or incentive

Cost driven (rents needs to be low enough to attract occupiers but high enough to be feasible for development)

Lack of supply in the CBD (of the right size and quality)

Large pool of qualified labour

Proximity to clusters of like or compatible industries (Hospital and health related demand)

Accessibility and amenity

Staff retention In terms of staging the office development, a key requirement is that the retail within the town centre is operating, ideally for 1 to 3 years or so to ensure trading conditions are optimised. Based on previous analysis undertaken on retail demand, we consider that 2017/18 is appropriate timing for Stage 1. It is important that the amenity of the town centre is well established before commercial development proceeds.

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6 RESIDENTIAL DEMAND

The variety of retail and commercial catalyst uses identified for the site will deliver the amenity, access and economics to support a significant amount of residential development. The ETC site in particular is well suited to deliver a variety of dwelling types to meet this demand. Given the mix of uses within a walkable catchment, it is particularly suited for medium/high density residential. Medium and high density living has historically been associated with tenure by renters as well as being a transitional housing arrangement for young singles or couples households saving a deposit for a (detached) home. For a range of economic, social, environmental and demographic reasons, townhouse and apartment living has clearly moved from being a forced choice to a preferred choice for more households. This trend is anticipated to continue in Far North Queensland and the Southern Corridor with future demand for residential apartments and townhouses being underpinned by:

Continued population growth in Mt Peter;

Increasing acceptance of living in apartments by all generations (such as singles, couple households and downsizers);

Changing nature of household structure with fastest growing segments being Singles (younger and older) and Couples (no kids), who require smaller dwellings;

Continued attraction of living within, or in proximity of, major activity centres such as the ETC that provide a range

of amenities and lifestyle opportunities;

Government policy to support increased housing densities;

Declining purchase and rental affordability of detached housing in sought after location which is forcing modified housing choices in respect of both location and dwelling type.

Traditionally within the Cairns market, medium/high density development has represented approximately 25% of the total dwelling market. Figure 18 illustrates the dwelling mix as at the 2006 Census. Figure 18: Dwelling Mix

Cairns (R) Cairns (C) - Trinity

Separate House 35,865 72.7% 9,448 84.7%

Semi-Detached\ Row Or Terrace House\ Townhouse - 1 storey 2,596 5.3% 493 4.4%

Semi-Detached\ Row Or Terrace House\ Townhouse - 2 + storey 1,493 3.0% 104 0.9%

Semi-Detached\ Row Or Terrace House\ Townhouse - TOTAL 4,089 8.3% 597 5.3%

Flat\ Unit Or Apartment - 1 to 2 storey 6,084 12.3% 796 7.1%

Flat\ Unit Or Apartment - 3 storey 1,851 3.8% 130 1.2%

Flat\ Unit Or Apartment - 4 + storey 483 1.0% 0 0.0%

Flat\ Unit Or Apartment - attached to house 55 0.1% 0 0.0%

Flat\ Unit Or Apartment - TOTAL 8,473 17.2% 926 8.3%

Other Dwelling 900 1.8% 185 1.7%

Dwelling Structure Not Stated 32 0.1% 3 0.0%

Total Dwellings 49,359 100.0% 11,159 100.0%

Medium / High Density 12,507 25.3% 1,523 13.6%

Source: ABS Census of Population and Housing 2006. Colliers International 2011.

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As illustrated, compared to the wider Cairns regions, the southern corridor represented by the Trinity SLA has a significantly lower proportion of medium/high density dwellings at approximately 14%. This would be expected to increase over time as the corridor matures and the mix of retail and employment land uses delivered increases. Analysis of building approvals post-2006 indicate that while the proportion of medium/high density product has increased over the previous 5 years across the wider Cairns LGA, it has remained constant within the Trinity SLA. Figure 19: ETC Trade Area Commercial Assessment

Source: ABS Building Approvals 2006 – 2011. Colliers International 2011. As much as an issue of underlying demand for medium/high density within the southern corridor, this is also an issue of development feasibility. In order to deliver dwelling densities over 40dwg/per ha requiring basement parking, median house prices need to be at a level which cover construction costs and deliver a development margin. Current median house price in the corridor at approximately $315,000 at present do not deliver this. Until these thresholds are reached, the initial stages of residential development are likely see densities of 15 – 40dwg/per ha supportable. In recent times, he residential property market has slowed considerably. Recent sales data indicates that prices have come-off over the past twelve (12) months, and are now approximately 10% - 15% below the prices achieved at the peak of the market. This is illustrated in more detail in Figure 20. In terms of future growth, we note that the future land supply in the ‘Southern Corridor’ region of Cairns has the highest number of potential residential lots available in the Cairns region, especially lots priced at the lower end of the market (i.e. sub $150,000). Accordingly, the amount of supply available will limit price growth opportunities in the short to medium term. We note that recent vacant land sales within the estates proximate to the subject property indicate a median land sale price of $125,000.

0%

10%

20%

30%

40%

Census 20062006-07

2007-082008-09

2009-102010-2011 YTD

Pro

po

rtio

n o

f M

ed

ium

/Hig

h D

en

sity

Cairns Trinity Cairns LGA

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Figure 20: ETC Trade Area Commercial Assessment

Source: RPData 2011. Colliers International 2011.

6.1 IMPLICATIONS

Based on population and dwelling formation forecasts for the southern corridor, additional dwelling demand is estimated to be in the order of 18,000 dwellings by capacity. Assuming current rates of underlying demand for medium/high density dwellings, this will result in demand for an additional 2,500 townhouses and apartments across the corridor. If the proportion of low density to medium/high density product was to mirror rates of underlying demand across the wider Cairns region, this demand would represent some 4,500 dwellings. In either scenario, the quantum of underlying demand for residential density is significant, and as previously stated, the ETC is ideally suited to satisfy some of this demand. The exact quantum of units for the site is constrained by a land area, however by analysing the proposed centre hierarchy for the southern corridor and assuming an unconstrained quantum of land it is reasonable to assume that the ETC could capture up to 25% - 30% of the base medium/high density dwelling demand; or approximately 600 - 750 dwellings. In terms of staging, as previous mentioned development feasibility constraints will dictate that the initial stages of residential will be medium density / townhouse type product of 15 – 40dwg/ per ha. As development increases and the ETC matures as an activity centre, underlying land values will increase and support the development of increased densities and ultimately replace interim uses at latter stages of development.

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD

Median Sale Price for Residential Property in Cairns Southern Corridor

House Unit Land

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7 STAGING PLAN

Figure 20: Recommended Commercial Land Use Mix and Staging Plan

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 TOTAL

Retail 55,000 sq m

Supermarket 4,000 4,000 2 x full line

supermarkets

DDS Stage 7,500 7,500 2 x DDS

Mini-Major / Specialty

8,500 8,500

Bulky Goods / Showroom

10,000 5,000

Entertainment 10,000 sq m

Cinema / Tavern etc 5,000 5,000

Office Up to 30,000 sq m

3,000 Stage 2 quantum and timing dependant on hospital delivery and market conditions

Residential Up to 750 dwellings

As per market conditions

Source: Colliers International 2011.

APPENDIX A CICV Standard Terms of Business

Colliers International Consultancy and Valuation Pty Limited Terms and Conditions

IT IS AGREED AS FOLLOWS:

1 DEFINITIONS ‘Confidential information’ means information that: (a) Is by its nature confidential; (b) Is designated by Us as confidential; (c) You know or ought to know is confidential; (d) and includes, without limitation:

(i) Information comprised in or relating to any of Our intellectual property in the Services or any reports or certificates provided as part of the Services; and

(ii) The Quotation annexed hereto.

‘Currency Date’ means, in relation to any valuation or consultancy report, the date as at which our professional opinion is stated to be current. ‘Fee’ means the amount agreed to be paid for the Services as set out in the Quotation. ‘Parties’ means You or Us as the context dictates. ‘Quotation’ means the written quote provided by Us in relation to the Services. ‘Services’ means the valuation or consultancy services provided pursuant to these Terms and Conditions and the Quotation, and includes any documents, reports or certificates provided by Us in connection with the services. ‘We’, ‘Us’, ‘Our’ means Colliers International Consultancy and Valuation Pty Limited (ABN 88 076 848 112). ‘You’, ‘Your’ means the entity engaging Us to perform the Services as set out in the Quotation.

2 PERFORMANCE OF SERVICES 2.1 We will provide the Services in accordance with: (a) The Terms and Conditions contained herein; and (b) The required provisions of the current Australian Property

Institute Professional Practice standard.

3 CONDITION OF THE PROPERTY

3.1 In undertaking the Services We will have regard to the apparent state of repair, condition and environmental factors in relation to the property based upon a visual inspection, but We will not (and are not qualified to) carry out a structural, geotechnical or environmental survey. We will not inspect those parts of the property that are unexposed or inaccessible.

3.2 We will assume that there is no timber infestation, asbestos or

any other defect (unless advised otherwise) and that the property is compliant with all relevant environmental laws. It is Your responsibility to provide reports to Us that are relevant to these issues.

3.3 We will not undertake a detailed inspection of any plant and

equipment or obtain advice on its condition or suitability.

3.4 We recommend that You engage appropriately qualified persons to undertake investigations excluded from the Services.

3.5 No responsibility will be accepted either to You or to any third

party for loss or damage that may result directly or indirectly from the condition of the property.

4 ENVIRONMENT AND PLANNING 4.1 We will obtain only verbal town planning information. It is Your

responsibility to check the accuracy of this information by obtaining a certificate under the appropriate legislation.

4.2 State or Federal Laws may require environmental audits to be

undertaken before there is a change of land use. You will provide such audits to Us where they are required. We will not advise You whether such audits are required or obtain such audits. If You do not provide Us with such audits We will perform the Services on the assumption that such audits are not required.

5 BUILDING AREAS AND LETTABLE AREAS

5.1 Where a survey is provided to Us for consideration, We will assume that information contained in the survey is accurate and has been prepared in accordance with the Property Council of Australia (PCA) Method of Measurement.

5.2 If You do not provide Us with a survey, We will estimate building and/or lettable areas based only upon available secondary information (including but not limited to building plans, Deposited Plans, and our own check measurements). Such estimates do not provide the same degree of accuracy or certainty as would be provided by a survey prepared by an appropriately qualified professional in accordance with the Property Council of Australia (PCA) Method of Measurement.

5.3 Where such a survey is subsequently produced which differs from the areas estimated then You will refer the valuation or consultancy advice back to Us for comment or, where appropriate, amendment.

6 OTHER ASSUMPTIONS

6.1 Unless otherwise notified by You, We will assume: (a) there are no easements, mortgages, leases, encumbrances,

covenants, caveats, rights of way or encroachments except those shown on the Title; and

(b) all licences and permits can be renewed and We will not make any enquiries in this regard.

6.2 Where third party expert or specialist information or reports

are provided to Us or obtained by Us in connection with the Services (including but not limited to surveys, quantity surveyors reports, environmental audits, structural/dilapidation reports), We will rely upon the apparent expertise of such experts/specialists. We will not verify the accuracy of such information or reports.

7 VALUATION FOR FIRST MORTGAGE SECURITY 7.1 Where the Services are provided for mortgage purposes, You

agree that You will not use the valuation or consultancy report where the property is used as security other than by first registered mortgage.

7.2 We reserve the right, at Our absolute discretion, to determine

whether or not to assign Our valuation to any third party. Without limiting the extent of Our discretion, We may decline a request for assignment where:

(a) the proposed assignee is not a major recognised lending

institution (such as a major bank); (b) the assignment is sought in excess of 3 months after the date

of valuation; (c) We consider that there has been a change in conditions which

may have a material impact on the value of the property; (d) the proposed assignee seeks to use the valuation for an

inappropriate purpose (including in a manner inconsistent with Your agreement at clause 7.1); or

(e) Our Fee has not been paid in full. 7.3 Where We decline to provide an assignment on either of the

bases at 7.2(b) or (c), We may be prepared to provide an updated valuation on terms to be agreed at that time.

7.4 In the event that You request us to assign Our valuation and

We agree to do so, You authorise Us to provide to the assignee a copy of these Terms and Conditions, the Quotation and any other document, including instructions provided by You, relevant to the scope of Our Services.

8 ESTIMATED SELLING PRICE 8.1 Where You instruct Us to provide an Estimated Selling Price,

You agree that the Services: (a) are limited to the provision of a opinion based upon Our

knowledge of the market and informal enquiries. (b) We are not required to carry out a full inspection of the

property; any inspection of comparable properties; a search on Title(s) or other enquiries as to encumbrances, restrictions or impediments on Title(s); or other investigations which would be required for a formal valuation.

(c) provide an indicative figure only which is not suitable for use for any purpose other than as general information or guide as to sale expectations. It is not suitable to be relied upon for the purpose of entry into any transaction.

8.2 No responsibility will be accepted either to You or to any third

party for loss or damage that may result from the issue of such an Estimated Selling Price.

Colliers International Consultancy and Valuation Pty Limited Terms and Conditions

9 CURRENCY OF VALUATION

9.1 Due to possible changes in market forces and circumstances in relation to the subject property the Services can only be regarded as relevant as at the Currency Date.

9.2 Where You rely upon Our valuation or consultancy report after

the Currency Date, You accept the risks associated with market movement between the Currency Date and the date of such reliance.

9.3 Without limiting the generality of 9.2, You should not rely upon

Our valuation or consultancy report:

(a) after the expiry of 3 months from the Currency Date; (b) where circumstances have occurred during that period which

may have a material effect on the value of the property or the assumptions or methodology used in the valuation or consultancy report.

10 MARKET PROJECTIONS

10.1 Any market projections incorporated within our Services including, but not limited to, income, expenditure, associated growth rates, interest rates, incentives, yields and costs are projections only, and may prove to be inaccurate. Accordingly, such market projections should be interpreted as an indicative assessment of potentialities only, as opposed to certainties.

10.2 Where Our Services include market projections such

projections require the dependence upon a host of variables that are highly sensitive to varying conditions. Accordingly, variation in any of these conditions may significantly affect these market projections.

10.3 Where market projections form part of Our Services, We draw

your attention to the fact that there will be a number of variables within acceptable market parameters that could be pertinent to Our Services and the projections adopted are representative of only one of these acceptable parameters.

11 YOUR OBLIGATIONS

11.1 You warrant that the instructions and subsequent information supplied by You contain a full and frank disclosure of all information that is relevant to Our provision of the Services.

11.2 You warrant that all third party expert or specialist reports

provided to Us by You for the purpose of Us providing the Services are provided with the authority of the authors of those reports.

11.3 You authorise and licence us to incorporate Your intellectual

property within our report(s).

11.4 You will not release any part of Our valuation or consultancy report or its substance to any third party without Our written consent. Such consent will be provided at Our absolute discretion and on such conditions as We may require including that a copy of these Terms and Conditions be provided to such third party. This clause shall not apply to persons noted as recipients in Your prior instruction to Us or in the Quotation provided that You shall provide any such recipient with a copy of these Terms and Conditions.

11.5 If You release any part of the valuation or consultancy advice

or its substance with our written consent, You agree: a) to inform the other person of the terms of our consent; and b) to compensate Us if You do not do so. We have no responsibility to any other person even if that person suffers damage as a result of any other person receiving this valuation or consultancy advice.

11.6 You must pay our Fees within 14 days of the date of a

correctly rendered invoice. Fees that remain unpaid for a period of 30 days or more will attract an administration charge of 2% of the total of the invoice calculated per month or part thereof.

11.7 We reserve the right to reconsider or amend the valuation or

consultancy advice, or the Fee set out in our Quotation to You if:

(a) Certificates, surveys, leases, side agreements or related

documentation that were not provided to Us prior to the provision of the Services are subsequently provided, and contain matters that may affect the value of the advice; or

(b) Where subsequent site inspections made in relation to any of the matters raised in clause 3 materially affect or may alter the value of the property the subject of the Services.

12 CONFIDENTIALITY

12.1 You must not disclose or make any of the Confidential Information available to another person without Our written consent.

12.2 If consent to disclose the Confidential Information is provided

by Us, You agree to abide by any additional terms and conditions that We may apply to that disclosure.

13 PRIVACY

13.1 We may obtain personal information about You in the course of performing Our Services. We respect Your privacy. The Privacy Amendment (Private Sector) Act, 2001 requires Us to advise You that we will only obtain information that is necessary to assist us in the course of performing Our Services. If it is necessary for Us to engage third parties, we will inform these parties that they are not to disclose any personal information about You to any person or organisation other than Us.

A copy of Our Privacy Policy can be obtained by contacting Our Chief Privacy Officer.

14 SUBCONTRACTING 14.1 We may subcontract or otherwise arrange for another person

to perform any part of the Services or to discharge any of Our obligations under any part of these Terms and Conditions, with Your consent.

15 LIABILITY

15.1 You agree to release Us and hold Us harmless from all liability to You for or in respect of any loss, damage, costs and expenses of whatsoever kind which we have or may have or, but for the operation of this Clause, might have had arising from or in any way connected with the Services or the use of the Services or any part of them. This release shall be complete and unconditional except in the case of gross negligence or wilful misconduct by Us in the provision of the Services.

15.2 You agree that You will fully indemnify Us for and in respect of

all loss, liability, costs and expenses of whatsoever kind which We may suffer or incur arising from or in any way connected with any breach by You of Clause 11 or Clause 12. This indemnity shall include but not be limited to loss, liability, costs and expenses which we may suffer or incur in respect of any claims, actions, proceedings, disputes or allegations made against Us or to which we are a party.

16 ENTIRE AGREEMENT

16.1 No further agreement, amendment or modification of these Terms and Conditions shall be valid or binding unless made in writing and executed on behalf of the Parties by their duly authorised officers.

16.2 If there is an inconsistency between these Terms and

Conditions and the Quotation, any letter of instruction from You, or other specific request or information, the other specific request or information shall prevail to the extent of the inconsistency.

CONTACT DETAILS MOB 61 411 269 818 DIR 02 9257 0331 FAX 02 9347 0831 Colliers International Consultancy and Valuation Pty Limited ABN 88 076 848 112 Level 12, 225 George Street Sydney NSW 2000 www.colliers.com.au COPYRIGHT Colliers International.

Colliers International Consultancy & Valuation offers a range of valuation services in the following specialist areas:

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