Manila, October 15, 2018 - Colliers International’s latest report, “Win-Win Real Estate Strategies: Closing Asia’s Infrastructure Gap” stresses that underinvestment in infrastructure is threatening Asia’s growth and prosperity. In the Philippines, inadequate infrastructure has constricted Manila’s growth potential. To address this, the current administration has committed to double its infrastructure allocation and speed up the implementation of transportation projects. Aside from improving access to Manila’s business hubs, these infrastructure projects should also dictate developer strategies over the near to medium term.

The report released by Colliers International’s Valuation and Advisory Services (CIVAS) notes that most infrastructure projects are not financially viable on their own. Built first and foremost for their public benefits, the projects generate limited revenue to be attractive for investors. As a result, investors and financiers are unwilling to finance infrastructure projects.

But Colliers believes that well thought-out real estate strategies can play a significant role in making infrastructure projects more bankable – raise the projects’ investment yield - through value creation and revenue generation schemes that are attractive to private sector investors. They are particularly effective in closing the financing gap for transportation infrastructure, including airports, seaports and mass rapid transit systems.

Beyond the financials, CIVAS notes that airport real estate strategies should also factor in long-term strategic and operational considerations. Colliers believes that the government should allocate land to accommodate airport-related industries and economic activities that are critical for regional economic growth.  Colliers believes that the expansion of Clark Airport is anchored on the government’s plan to further expand industrial operations in Central Luzon and maximize the Clark-Subic corridor as a key transshipment hub in the Asia Pacific region. Meanwhile, the expansion of Mactan-Cebu International Airport complements the aggressive development of resort-oriented townships in Mactan and the declaration of two parcels of land owned by the Mactan-Cebu International Airport Authority as a special economic zone.

Colliers also believes that airport strategies should complement – not directly compete – with the surrounding urban area. The airport should aim to attract investors, businesses and real estate assets that add value to the offering and generate a catalyst effect on the economic base of the wider region. The airport authority should also ensure infrastructure connectivity between the airport and the wider city. In our opinion, the development plan for the Clark Airport expansion is aligned with this recommendation. The access from Metro Manila to Clark Airport is being developed thru the construction of a passenger rail from Manila to Clark Airport while industrial activities around Clark and its environs will be supported by the construction of a Subic-Clark cargo rail.

In the Philippines, insufficient infrastructure has been a major concern of commuters and private developers. Data from the Budget department show that over the past fifty years, the Philippines’ infrastructure spending has been a measly 2.6% of the country’s gross domestic product. This is much smaller than the annual allocation of comparable Asian economies (see table). The current administration is planning to more than double the Philippines’ annual infrastructure allotment to about 6% this year to about 7% in 2022.

Several infrastructure projects are in the pipeline, including the Clark Airport modernization, Cavite-Laguna Expressway, Light Rail Transit (LRT) 1 extension, and North-South Luzon passenger and cargo rail projects. Both  the national government and private proponents have also lined up major projects in Metro Manila that are due to be completed over the next three to seven years. These include the Metro Rail Transit (MRT)-7, Bonifacio Global City (BGC) link bridge, LRT-MRT Common station, Bus Rapid Transit (BRT), Makati subway, and Metro Manila subway system.

Several property developers have been aggressive in forming consortia and endorsing infrastructure projects to the government. The formation of a ‘super consortium’ proposing to rehabilitate the Manila International Airport and establishment of infrastructure units by major property developers that will handle rail and subway projects connecting business districts in Quezon City, Makati, and Taguig are some of the measures that developers are implementing to capture gains in the property sector brought about by the government’s aggressive “Build, Build, Build” program.

Colliers believes that the implementation of infrastructure projects in Metro Manila should provide access to properties that could be redeveloped into mixed commercial, residential, and hotel/leisure estates. These infrastructure plans will dictate the direction of real estate developments beyond the current administration’s term.

Eventually, we see private developers taking a more aggressive role in building crucial infrastructure to boost growth within their integrated communities. These companies should also take advantage of the ramped up public infrastructure development in Metro Manila by seizing opportunities in the operation and maintenance (O&M) of key transport infrastructure.

How the Philippines Compares

Country

Infrastructure Spending as % of GDP (2010-2016)

Overall Infrastructure Ranking out of 137 countries (2017)

China

9.5

21

Vietnam

8

64

India

7.5

25

Malaysia

6

14

Thailand

5

34

Indonesia

3

30

Philippines

2.2

90

Sources: World Economic Forum; World Bank; ADB; Respective economies‘ statistical agencies

Selected Metro Manila Projects

Infrastructure Project

Projected Completion

Metro Manila Subway

2025

First 3 stations by 2022

Metro Rail Transit (MRT) 7

2021

Light Rail Transit (LRT) 1 Extension

2021

MRT-LRT Common Station

2020

Manila Bus Rapid Transit (BRT) 1

2020

Sources: PPP Center; DPWH; DOTr



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