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Infrastructure to dictate developers’ strategies beyond Duterte’s term – Colliers

The traffic congestion in Metro Manila has compelled government to improve infrastructure connectivity and establish more business hubs outside of the capital region.

Manila, 23 September 2019 - The Philippine government’s ambitious infrastructure plan is being anchored by its decentralization push. The traffic congestion in Metro Manila has compelled the national government to improve infrastructure connectivity and establish more business hubs outside of the capital region. Colliers believes that the Duterte administration’s massive infrastructure implementation and decentralization thrust should offset the potential impact of the moratorium on ecozone approvals in Metro Manila.

According to Colliers’ latest Radar report, “Road Works: Impact of infrastructure development on township expansion outside Metro Manila,” a series of public projects led by the government should provide the impetus for developers to build more office buildings and residential projects. We expect this to help support the needs of tenants looking to lease space outside of Metro Manila. Colliers also sees appetite for residential projects outside the capital region being buoyed by the government’s massive infrastructure program.

Based on the government’s infrastructure plan, Colliers expects Metro Clark, Metro Cebu, Iloilo, Bacolod, Bulacan province and Davao City to benefit from the Duterte administration’s infrastructure push. This should result in a more buoyant property market in these areas.

Colliers expects Davao to remain an attractive location for tourists and business travelers even after the current president’s term, due to the economic impact of increased infrastructure spending and renewed investor interest.

Colliers believes that various infrastructure projects lined up for completion from 2021 to 2024 should further boost Metro Cebu’s attractiveness as a key property destination outside Metro Manila. The completion of the Mactan-Cebu International Airport in 2018 has raised Cebu’s attractiveness as a major business hub and we see this contributing to greater office space take-up in the city’s business districts over the next three years. The expanded facility has also buoyed the demand for hotels and resort-oriented condominium projects, especially in Mactan.

For more than 20 years, Clark’s take-off as a central business district (CBD) outside Manila has been constrained by the lack of supporting infrastructure. The most important missing link is a high-speed train that would connect Metro Manila and Metro Clark. Realizing the importance of connectivity in stimulating business activities in the area, the current administration has lined up a number of projects that Colliers believes should play a significant role in transforming Metro Clark into the country’s next major economic corridor. Colliers sees the completion of Skyway 3 partly benefiting Metro Clark’s property sector.

We also see increased appetite for township development in Bulacan following the development of the new Manila International Airport. Following the completion of Metro Rail Transit-7 (MRT-7), due for completion in 2022, we see Bulacan, particularly San Jose del Monte City, and the Northern Quezon City area becoming a major office and residential hub in the next three to five years.

Colliers believes that the implementation of infrastructure projects in key urban areas outside of Metro Manila should stimulate redevelopment of areas into townships and therefore drive an uptick in office and residential supply in areas outside Manila. The quality of the Philippines’ infrastructure network has been wanting and this is reflected in the country’s poor showing in regional comparisons. This has propelled the current administration to help avert the Philippines’ eroding global competitiveness and improve the country’s infrastructure backbone. Colliers believes that the infrastructure plans of the current administration are likely to strongly influence the direction of real estate developments beyond the term of President Duterte.

The completion of infrastructure projects such as airports, seaports, expressways, and railways should bode well for both developers and occupiers. We recommend that developers take advantage of the increased infrastructure spending by:

> Strategic acquisition of land outside Metro Manila such as Cebu, Pampanga, Bulacan, and Davao
> Differentiating projects as the market becomes increasingly competitive. Aside from the typical office and residential projects, developers should consider featuring other projects such as malls, hospitals, and schools within their townships.  
> Partnering with national players. Homegrown developers with massive land in the provinces should tie up with national players that have extensive experience in developing integrated communities.

Overall, Colliers expects developers to continue pursuing opportunities to develop satellite communities outside of Metro Manila given the proposed airport development and modernization projects. Integrated communities offer a better value proposition than standalone projects given their focus on mixed-use development. We believe that greater scale combined with a mixed-use focus makes integrated townships an attractive option for investors. Colliers also expects more outsourcing tenants to gravitate toward integrated communities as they offer a better living and working environment.