Colliers Radar Philippines 22 May 2018 Mequeni: Inviting National Developers to Pampanga Mequeni1: Inviting National Developers to Pampanga The government’s active infrastructure implementation and decentralisation programme is encouraging developers to look closely at Pampanga, notably Clark Freeport and adjacent cities and municipalities. We think By Joey Roi Bondoc the Clark-Angeles-San Fernando corridor (Metro Clark) Manager| Research has high potential to become a key property investment hub outside Metro Manila. We see opportunities not only [email protected] for the office, residential, and retail segments, but also The Clark-Angeles-San Fernando for the leisure and industrial sectors. Given the relatively cheap developable land in the area, Colliers believes (Metro Clark) corridor in Pampanga that the development of integrated communities is a is benefiting from the government's practical route for many developers. To maximise Metro Clark’s potential, Colliers encourages both local and push to spread economic national developers to take the following steps: opportunities outside of Metro > Highlight differentiating features of townships; Manila. This is enticing national > Build three and four-star hotels and meeting, property developers to invest incentive, conference and exhibition (MICE) facilities; heavily in Metro Clark, resulting in > Explore transit-oriented, tourist-centric retail projects > Redevelop brownfield assets and old office and retail a pronounced development of buildings especially in downtown Angeles and San integrated master-planned Fernando; communities. Colliers believes that > Explore opportunities in the fringes of Metro Clark; > Develop flexible office space to accommodate firms national players need to cash in on that require smaller space; and the region's improving > Explore operation and maintenance (O&M) infrastructure backbone and opportunities involving transportation projects in Northern-Central Luzon area highlight the differentiating features Colliers also encourages local players with sizeable of their developments to maximize landbank but with limited experience in building master- planned townships to partner with national players in Metro Clark's potential and stay developing large integrated communities. We see more ahead in a fiercely competitive and aggressive development of office, condominium, and fast-evolving property market. hotels moving forward. The enhancement of the country’s infrastructure backbone should unlock land values in urban areas outside of the country’s capital including Metro Clark. This should dictate the strategies of local and national developers. And with Metro Clark being a major beneficiary of the government’s “Build, Build, Build” programme, we see more developers gravitating towards the region over the medium to long term. 1 Local dialect meaning "come here". 2 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International Military Facility to Next CBD ....................... 4 Clark cashes in on infrastructure ................ 4 On to the Next CBD ................................... 4 Top BPO site in the countryside ................. 5 Horizontal outstrips Vertical: Preference for House and Lots .......................................... 5 Integrated Communities in the New Metropolis .................................................. 7 Recommendations ..................................... 9 Contents 3 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International Military Facility to Next CBD 1. Clark Airport Expansion. Projected to raise the facility’s capacity from four million passengers per The Philippine government’s economic strategy is year to 12 million per annum by 2020. The expanded anchored on two main pillars - infrastructure airport is being positioned as an alternative to the implementation and decentralisation. The current congested Ninoy Aquino International Airport (NAIA) administration’s goal of spreading business opportunities in Manila and should drive the occupancy levels of outside of the country’s capital is spilling over to major hotels and sustain consumer traffic of malls in Clark, urban hubs such as Clark, a former American military Angeles, and San Fernando. facility transformed into a freeport zone that is located about 90 kilometres north of Manila. 2. Subic-Clark Cargo Railway. Connects Subic Port and Clark International Airport. It seeks to maximise the For more than 20 years, Clark’s take-off as a central currently underutilised Subic Port and decongest business district (CBD) outside Manila has been Manila Port. We see the project boosting Central constricted by the lack of supporting infrastructure, chief Luzon’s feasibility as an industrial hub and stature as among which is a high-speed train that would connect a key alternative to the Cavite-Laguna-Batangas the country's capital and Clark and its environs. corridor. The government aims to complete the railway by 2022. Among the national developers we see benefiting from the development of Clark’s infrastructure network are 3. Manila to Clark Passenger Railway (Phases 1 and 2). Filinvest Group with its planned mixed-use project within The 106-kilometre train line will link Manila to Clark. the New Clark City and redevelopment of Mimosa leisure The project is expected to be completed between centre; Udenna with its integrated Clark Global City; and 2021 and 2022. We see the project decongesting SM Prime with its SM City Clark complex. Ayala Land Metro Manila and spurring business activities in should also benefit as it has ramped up the development Malolos, Bulacan and Clark which should fuel office of its Alviera township in Porac which is five to ten space requirements and end-user demand for minutes way from Clark Freeport. Other nearby housing in Clark, Angeles, Mabalacat, San developments by national players that we see benefiting Fernando, and Porac. from Metro Clark’s transformation are Megaworld’s Capital Town project, Century City’s Azure Residences, 4. Skyway Stage 3. The elevated expressway reduces Torre Lorenzo's Tierra Lorenzo San Fernando in San travel time from Buendia, Makati to Balintawak, Fernando; and Ayala’s Marquee mall and residential Quezon City from the 2 hours to 20 minutes. This developments in Angeles City. The projected surge in should hasten travel to San Fernando, Angeles City, residential demand in Metro Clark should also benefit and Clark through North Luzon Expressway (NLEX) other national players such as 8990, NorthPine, Pueblo and make the corridor a viable secondary location de Oro, P.A. Alvarez, Robinsons Land, and Vista Land. for Metro Manila-based BPO operations. Skyway 3 is due to be completed in 2019. Local developers are also moving to take advantage of the planned transformation of the Clark-Angeles-San 5. NLEX-SLEX Connector Road. This is projected to Fernando corridor. Among the local players that have reduce travel time from the South Luzon Expressway been aggressive in developing office towers and (SLEX) to NLEX from two hours to 20 minutes. It industrial facilities are Nepomuceno & Sons and AC aims to cut travel time between two major industrial Beautiful Islands (ACBI) Realty Development Corp, the hubs, Clark and Calamba in Laguna, from three operator of Jenra malls. hours to one hour and 40 minutes and this should benefit manufacturers with industrial facilities in both Clark cashes in on infrastructure Central and Southern Luzon. The construction of connector road will start by July and is expected to Metro Clark’s potential to become a major business hub be completed in 2021. has been constrained by the lack of infrastructure. Realising the importance of connectivity in stimulating business activities in the area, the current administration On to the Next CBD has lined up a number of projects that Colliers believes The Metro Clark property market is still dominated by should play a significant role in transforming Metro Clark local players. Except for retail where the national players into the country’s next major economic corridor. We see SM, Ayala, Robinsons, and Vista have overtaken their these infrastructure projects boosting office, residential, local counterparts in terms of leasable space, most of retail, hotel, and industrial demand in Metro Clark. office and residential projects in the corridor were built by local players. Moving forward, we see Metro Clark’s property landscape evolving and this should be enabled 4 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International by the aggressive entry of national developers facilitated than 40,000 sq m (430,000 sq ft) of BPO-ready office by the government’s plan to implement infrastructure and supply in the city with its Entec 1 and 2 buildings while decentralise. the national developers Ayala Land and Robinsons Land cover the remaining 40%, with office space offered Top BPO site in the countryside inside their respective malls – Marquee and Robinsons Angeles. The remaining 70,000 sq m (753,000 sq ft) is Clark Freeport Zone remains the major BPO hub in the mainly developed by smaller local players and occupied Central Luzon region. In 2016, Clark was ranked by by traditional and non-outsourcing occupants. Tholons as the 97th most attractive location for outsourcing operations in the world. However, in 2017, San Fernando accounts for about 13% of Metro Clark’s the city slipped out of the Top 100 list. Despite the office stock or about 39,000 sq m (420,000 sq ft).