Local conglomerates are finding a way to join the government’s massive infrastructure program despite the administration’s preference to finance several big-ticket projects through official development assistance or government-to-government financing, instead of public bidding.
The government’s “Build, Build, Build” program, meanwhile, is expected to further boost the growth of the domestic property sector by unlocking the land values across the country, according various real estate services firms.
Already land values across the country, especially in Metro Manila, have gone up significantly over the past few years and are expected to continue to rise as the administration plans to improve infrastructure nationwide.
Conglomerate San Miguel Corp., which has won the NAIA Express project in 2013 through a public bidding, plans to submit as many 10 unsolicited proposals for the government’s consideration.
San Miguel already submitted an unsolicited proposal to build a P700-billion international airport in Bulacan province and a P27-billion Manila-Tagaytay toll road project. It also proposed to build a $2-billion flood control project to help solve flooding problems in Metro Manila.
Ayala Corp. and SM Investments Corp have teamed up to submit a P25-billion unsolicited proposal to build an 8.6-kilometer elevated tollroad linking Sta. Mesa, Manila to the Mall of Asia complex in Parañaque City.
Infrastructure conglomerate Metro Pacific Investments Corp. offered a P25-billion unsolicited proposal to build an expressway connecting Cavite, Tagaytay and Batangas. Metro Pacific in partnership with Ayala also offered to acquire Mass Railway Transit 3 from the government for P12 billion.
Meanwhile, Megawide Construction Corp., which won several infrastructure projects during the previous administration, submitted proposal to build a second runway and expansion of the airport for P208 billion.
A consortium composed of Filinvest Development Corp. and JG Summit Holdings Inc. promised to turn Clark International Airport into a world-class facility by 2020, if the government accepts their P186.64-billion unsolicited proposal.
These conglomerates are hoping that the government, which earlier expressed openness to unsolicited proposals to speed up infrastructure development in the country, will review and act on their offers.
Unlocking land values
While the Philippines continues to enjoy robust economy growth over the past few years due to remittances and strong consumer spending, Colliers Philippines research manager Joey Roi Bondoc said much of the country’s expansion would hinge on increassed infrastructure spending.
“The ushering in of the “golden age of infrastructure” also lends support to the government’s decentralization push which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside,” Bondoc said.
“Over the near to medium term, we see the Philippines sustaining robust growth on the back of the government’s infrastructure and decentralization push. Among the key economic segments that will benefit from the government’s thrust is property development. Infrastructure implementation coupled with decentralization should spur the growth of office, residential, retail, industrial, and hotel & leisure segments,” he added.
Davie Leechiu, president and chief executive of Leechiu Property Consultants, said the robust domestic economy and the expected inflow of foreign investments following the signing of investment and trade deals with various Chinese and Japanese firms were expected to fuel the growth of the property sector.
“Over the last 12 months we’ve seen various PPP deals being signed in Japan and China. We estimated that by the fourth quarter of this year or first quarter of 2018, we will see these deals translate into actual employees being hired and office space take up not just in Metro Manila by in other parts of the country,” Leechiu said.
Because of the positive outlook on the domestic property sector, several property firms are accelerating their expansion plans for office, retail and residential projects, as well as industrial zone and warehousing developments.
More office spaces
Leechiu expects another 4.27 million square meters of office spacefrom 2017 to 2023, as property firms roll out office projects that primarily cater to the business process outpouring industry. This will add to the market’s current office supply of 8.74 million sq. m.
Despite the completion of new office space supply, Leechiu said rents remain at record highs. Rent rental rate for office space in Makati and Bonifacio Global City currently ranges from P900 to P1,300 per square meter, while those in Ortigas, Quezon City, Alabang and Bay Area hover around P400 to P800 per square meter.
BPO firms are also expanding outside the Metro Manila and Cebu, with companies now willing to go to Iloilo, Dumaguete, Palawan, Baguio, Cagayan de Oro and even Tuguegaro to tap the skilled workers in these areas.
The residential market has benefitted, too, from the robust economy as land values of residential condominiums as well as villages continue to go up.
“Rising rates in high-end residential condominiums market motivate landlords to develop more projects,” Leechiu said.
He said several cities this year hit high new record highs in terms of land values.
Land prices in Bonifacio Global City are expected to hit P1 million per square meter, up 33 percent from a year ago level, while those in Filinvest City in Alabang are expected to reach as high as P365,000 per sq. m, up 35 percent from last year’s level.
Rise of new sectors
The steady growth of the economy has fueled the growth of other sectors of the property market, such as industrial and warehousing development, as well as dormitories and commercial and retail projects.
Given the increased economic activity across the country due to expansion program of various companies and the interest from foreign manufacturers, the market expects an increase in capital values of warehouse, logistics and manufacturing sites in Metro Manila.
There are now 70 industry parks with over 133,000 hectares of land, according to Leechiu.
As the government puts up more airports, ports, toll roads and infrastructure to ease the movement of cargoes, Leechiu expects more companies to consider going to next wave cities in Bulacan, Pampanga, Laguna and Batangas.
And as more BPO firms expand in the provincial areas and increase the spending capacity of workers, property developers are expected to increase their retail portfolio in these new areas.
Most of the mall expansions of big shopping mall developers, for instance, are now geared to areas outside Metro Manila.
SM Prime Holdings Inc. opened five malls outside Metro Manila this year. These are SM CDO Downtown Premier in Cagayan de Oro, SM Cherry Antipolo in Rizal, SM Center Tuguegarao Downtown in Cagayan, SM City Puerto Princesa in Palawan and SM Center Lemery in Batangas.