Planes, Trains and Automobiles: Dissecting the Role of Infra on Asset Recovery

The infrastructure projects implemented by the national government have dictated the strategies of developers over the past decades.

These have since provided access to properties that could be redeveloped into mixed commercial, residential and industrial areas, and have helped the government create economic opportunities in areas outside of Metro Manila. As a result of these public projects, business opportunities have spread to neighboring areas such as Cavite, Laguna, Batangas, Pampanga and Tarlac.

Despite the disruption of COVID-19 in the Philippine real estate market, Colliers recommends that developers continue to maximize the government’s plan to accelerate infrastructure development by implementing strategic land developments in areas outside the metropolitan region of Manila, because the infrastructure should allow the decentralization of the urban core to the provinces.

Spending below 4.5% of GDP

Data from the Ministry of Budget and Management shows infrastructure spending reached 681 billion pesos in 2020, down 23% from 881.7 billion pesos in 2019, as the government realigned funds for its response to COVID-19. Infrastructure spending was around 4.5% of GDP in 2020. The government plans to spend at least 1.17 trillion pesos in 2021, or nearly 6% of the country’s economic output.

In our opinion, infrastructure plays an important role in reviving the Philippine real estate market. Completing toll roads, freight railways, subways and airports will play a crucial role in paving the proverbial path to recovery.

Airport projects drive up property prices in the north

Bulacan Airport, also known as the New Manila International Airport, will cover 2,500 hectares of a planned township of 12,000 hectares.

It will have an initial capacity of 100 million passengers per year which could expand to 200 million passengers. The airport is expected to be completed by 2025.

New Clark International Airport, located 80 kilometers northwest of Metro Manila, will have a new terminal that can accommodate up to 8 million passengers per year. In our view, the expanded and modernized airport has the potential to strengthen Pampanga’s stature as a hub for real estate development in central Luzon.

Railways unleash the potential for land appreciation

The expansion of Metro Manila’s rail system is expected to free up underutilized areas for township development. Developers with a large stock of office and condominium in the northern part of Metro Manila will likely benefit from Metro Rail Transit Line 7 (MRT-7) as it connects directly to the project’s North Avenue station. Another project that we believe is increasing the value of land is the Mega Manila Metro.

Other big projects in the pipeline include the North-South Railway which is expected to benefit commuters and further raise land and real estate prices in northern and southern Luzon.

Roads improving access to municipalities

Other infrastructure projects that will likely lead to significant office and housing developments around Metro Manila are the BGC-Ortigas Link Bridge, the Estrella-Pantaleon Bridge and the Skyway SLEx Extension.

Completion of the projects should further increase the attractiveness of established business poles as outsourcing locations as they improve employee mobility.

Colliers Philippines believes that the implementation of infrastructure will play a central role for the long-term growth of the country’s economy. We are seeing its positive multiplier effects spill over into ownership.

Congratulations to my colleague, Maricris Sarino-Joson, the new head of the Colliers Philippines Owner Representation Unit.

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