Costco is pushing to expand its Australian warehouse network as families chase cheaper groceries and fuel. Picture: Supplied
Costco is pushing to blanket Australia with up to 20 new warehouses, as its next major move in Melbourne’s outer southeast faces a crucial $74m planning test.
The US retail giant is targeting new sites from Hobart to Geelong, Sydney, Perth and Adelaide as cost-of-living pressure drives more shoppers towards cheaper groceries, fuel and supersized trolley loads.
But its proposed Pakenham warehouse must first clear a planning hurdle on Monday, with Cardinia Shire councillors set to decide whether to approve the 6.2ha project.
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The proposed 130 Greenhills Rd warehouse would include a 14,268sq m store, 836 carparks and a major service station, planting one of the world’s biggest retail names in one of Melbourne’s fastest-growing corridors.
Planning documents say the project would create 250 full-time equivalent jobs once operating and support more than 400 jobs during construction.
An economic assessment lodged with Cardinia Shire says the warehouse would inject about $41m into the local economy each year once open.
Costco’s proposed Pakenham warehouse would include a major service station and 836 carparks. Picture: Supplied
Costco Australia managing director Patrick Noone has previously identified Hobart, Geelong, North Sydney, South Sydney, North Perth and South Adelaide as key markets the company was searching for suitable sites.
The Pakenham proposal is expected to become one of the next major tests of that national rollout.
Costco has 15 Australian stores, compared with Aldi’s more than 600, but has flagged plans for up to 20 new warehouses in five years.
Its expansion comes as Australian households continue to search for relief from higher grocery bills and petrol prices, with Costco’s membership model increasingly viewed as a way for families to stretch their budgets.
QUT consumer behaviour expert Professor Gary Mortimer said Costco was playing the long game as cost-conscious shoppers turned to bulk buying.
Retail expert Gary Mortimer previously said Costco recorded about $500m in after-tax profit, putting it ahead of Aldi’s $499.2m.
The company typically searches for sites with strong major-road access, growth-area populations of about 400,000 to 500,000 residents, about 14,000sq m of warehouse space and about 800 carparks.
Its trade area can stretch to a 45-minute drive, meaning a new warehouse can pull shoppers from well beyond its immediate suburb.
For Pakenham, that could make the proposed store a magnet for shoppers across Melbourne’s southeast and Gippsland.
But the proposal has also revived memories of Costco’s failed Officer South plan, which was approved by council before being blocked by the state government in 2023.
That decision centred on the use of industrial land, with the state government arguing the site needed to be protected for future jobs and industrial activity.
Costco’s warehouse model has become a major drawcard for shoppers looking to stretch household budgets. Picture: Supplied Picture: AP Photo/David Zalubowski
The Pakenham site sits in a similarly sensitive industrial planning zone, meaning the retailer again has to prove a large-format retail warehouse belongs in an area earmarked for employment and industrial growth.
Council officers have backed the new proposal, describing it as an anchor for the Pakenham South Employment Precinct.
If councillors approve the permit, Costco would still need to meet 54 conditions covering drainage, odour, signage, vehicle access and road upgrades.
The company would also need to upgrade the intersection of Koo Wee Rup Rd and Greenhills Rd to the satisfaction of the Department of Transport.
The site is about 500m from the Pakenham Water Recycling Plant, with odour-control measures required.
The proposed Pakenham Costco would become one of the retailer’s next major Victorian sites if approved. Picture: Grace Frost
An assessment commissioned by South East Water recommended upgraded ventilation, air curtains and other measures to reduce odour risk.
Colliers Melbourne East national director Gordon Code previously said Costco had the power to reshape entire commercial precincts because it acted as a destination retailer.
“People drive for miles, and the moment they commit to a site the phone runs hot from businesses wanting to be beside them,” Mr Code said.
“Costco looked at multiple sites, but this one wins hands down, direct freeway access and even a natural gas connection, which is critical when you’re baking, roasting and preparing food at Costco’s scale.”
Costco’s Australian expansion plans come as cost-of-living pressure continues to hit grocery and fuel bills. Picture: Liam Kidston
Mr Code said the clearest example was Moorabbin, where Costco anchors Goodman’s Chifley Business Park.
“Look at Moorabbin. Costco anchors Goodman’s Chifley Business Park, and rents in that pocket are about 20 per cent higher than anywhere else. That’s the halo effect,” he said.
“I’d fully expect Pakenham to follow the same playbook.
“Costco’s arrival will turbocharge commercial property values across the precinct.”
The retailer’s Victorian footprint has already shifted significantly this year.
Costco opened its $118m Ardeer warehouse after closing its Docklands store, which was sold to Sonic Healthcare for $100m and is being transformed into a $92m medical hub.
The Ardeer store includes a 16,000sq m warehouse and Australia’s largest Costco fuel station, with 38 pumps.
The retailer also has major Melbourne stores at Ringwood, Epping and Moorabbin.
At Ringwood, Costco became a major anchor after opening in 2013, helping draw shoppers and surrounding retail activity to the area.
The retailer’s proposed Melbourne southeast warehouse would sit in one of the city’s fastest-growing corridors. Picture: Costco via Brimbank City Council
At Docklands, Australia’s first Costco became a key part of the precinct after opening in 2009 before its closure and sale.
The company’s latest move into Pakenham would put it at the edge of Melbourne’s growth frontier, where new housing estates, industrial land and population growth are reshaping the city’s southeast.
It would also place Costco closer to households in areas such as Officer, Clyde, Cranbourne, Berwick, Drouin and Warragul, giving the warehouse a potential catchment well beyond Cardinia.
Mr Code said the Pakenham investment was a “vote of confidence” in Victoria at a time global players were choosing their next footholds.
“Victoria offers a compelling mix, sustained population growth, a deep consumer base and competitive operating costs relative to Sydney,” he said.
“Global retailers like Costco aren’t making these decisions lightly.
“They see Melbourne expanding eastward and outward, and they want to be at the centre of that growth.”
The planning decision will now determine whether Pakenham becomes Costco’s next major Victorian foothold, or whether the bulk-buy giant faces another setback in Melbourne’s southeast.
Councillors are expected to vote on the proposal on Monday.
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