THE nation's most powerful shopping centre owners are trying to stop the expansion of US discount warehouse chain Costco, claiming a planned multi-million dollar development is illegal.

In a raft of objections, the group - which includes Westfield, AMP and the Shopping Centre Council of Australia – says the proposed store is in breach of existing state planning laws, is “inappropriate” and that to create any special exemptions would be "anti-competitive" for other retailers.

The $60m development, in an industrial area of Auburn in Sydney’s west, takes in a vast 463sq km "main trade area" and hopes to follow Costco’s successful opening in Melbourne’s Docklands last year, achieved with the help of the Victorian Government.

Costco’s local managing director Patrick Noone admitted the proposal did not fit into existing New South Wales planning laws but the company hoped to get approval by re-defining itself as a "bulk goods retailer".

"We're a new type of retailer, we don’t fit into most planning laws," Mr Noone said.

"You have to be a supermarket or department store. We're none of that, but we're all of that.”

In submissions to the NSW Planning Department the company says: "The Costco business model ... is that of a 'retail warehouse' which is not recognised as an individual form of development under the Standard Instrument definitions.

"Whilst Costco cannot be properly characterised as 'Bulky Goods Retailing' the Costco wholesale and retail warehouse shares many structural and operational characteristics with bulky goods retailing but equally can not be considered to solely be a traditional retail centre development."

The company adds: "Whilst we acknowledge that the proposed use is prohibited, the Parramatta Road corridor is changing in nature to become more of a large format retail destination."

Competitors hit out at Costco

Westfield has told the NSW Government the development would be a "prohibited use under the current planning legislation" and that having a "major out-of-centre retail outlet" would cause major traffic congestion.

The Shopping Centre Council of Australia - which has 19 shopping centre owners amongst its membership – also says the site is inappropriate for a "big box" retailer and has concerns about traffic in the surrounding streets and roads.

AMP, which through its AMP Capital arm has two centres within Costco's trading area, also added its voice to the traffic concerns.

Some of these issues have also been raised by government bodies in separate submissions.

Costco opened its first Australian store in Melbourne's Docklands last August and within four months more than 52,000 people had paid between $55 and $60 for the privilege of shopping there.

Costco’s research says the 28 existing rival shopping centres in the Sydney catchment would lose a collective $61.7 million worth of sales.

The analysis, done by consultants Essential Economics, says Westfield Burwood and Westfield Parramatta alone would lose $15 million in sales but customers would benefit from lower prices.

Independent analysis by Macquarie Research has said that Costco prices were up to 15 per cent below competitors.

Mr Noone said based on overseas experience a city like Sydney could take up to five stores but it would take another 12 months after the application was approved before the Auburn store would be ready for business.

"It's been a very successful opening for us," Mr Noone said. "Better than other new countries that we've launched.

"In the past we were planning on opening one a year, we may now open two or more a year.

"Melbourne can take another one, Sydney can take several Costco.

"I think Brisbane Adelaide and Canberra are (also) good cities to invest in."

Costco has responded to all of the issues raised during the public consultation process and the NSW Planning Department is now making a recommendation about whether it believes the project should go ahead.

"The Department is currently promptly finalising its assessment of the proposed Costco development at Auburn," NSW Department of Planning media officer Tahria Sheather said.

"As part of this assessment, the Department considers all submissions lodged during the public exhibition period, along with the proponent's response to submissions."

Legitimate concerns - Shopping Centre Council

AMP's shopping centres team at AMP Capital declined to comment.

The Shopping Centre Council of Australia referred news.com.au to its submission to the NSW Planning Department.

In a newsletter to its member the Council says: "While we strongly welcome the arrival of Costco in Sydney, and the additional retail competition this will bring, we have serious and legitimate planning concerns about the proposed site."

Westfield had asked for the Costco development to be determined by the NSW Minister for Planning, Tony Kelly, said corporate affairs manager, Julia Clarke.

"This would allow the Costco application to proceed on its merits, but without the potential for any decision to create a precedent under which multiple retail sites could be approved in adjoining areas with inadequate public transport and other critical infrastructure."

Ms Clarke also noted: "Westfield routinely makes submissions both for and against various developments and has done so often over its 50-year history.”

She said the reason for lodging submissions was often to support long-standing Government policy of retail development in appropriately zoned locations, usually in or near town centres well-served by transport and other infrastructure.

Costco's proposed Auburn store:

14,000 sq m of shopping area - four to five times the average Coles or Woolworths supermarket

4000 different products versus more than 20,000 different products in an average Coles or Woolworths

800 car parks

First year sales $97.5 million with an average purchase of $155 per visit

Source: Costco, Macquarie Research