Emerging Cities: The Next Investment Hubs

by PRIME Philippines Research & Advisory Group  May 28, 2020

The oversaturation of Metro Manila through the acceleration of population growth and rapid urbanization have led to a shift in development perspective. In addressing the difficulties of the day-to-day life in the metro, the government has established an inclusive and more balanced economic development program for promising cities outside the capital called ‘emerging cities’.

 

Emerging cities can be characterized by their potential for job creation, promotion of healthy lifestyle, and efficient land use. With these in mind, top cities eyed for potential development outside of Metro Manila include Metro Cebu, Metro Davao, Metro Clark, Puerto Princesa, Bacolod, Cagayan de Oro and Iloilo City. While these cities are prioritized to become the next investment hubs, it is still the goal of the government to provide the same opportunities to other provincial areas which have the potential to become an ideal destination for investment.

 

With the potential of these cities, here are 4 reasons as to why these cities outside Metro Manila are ideal places to invest in:

 

Decentralizing the metro

In a recent study of the Asian Development Bank (ADB), Metro Manila was tagged as the most congested city in Asia. With a daytime population of more than 10 million, the overcrowded Metro Manila is a result of factors such as the influx of people from the provinces looking for better employment opportunities and higher labor wages. To alleviate congestion, the government has been promoting decentralization programs which would make emerging cities capable and attractive for investments. Included in these government initiatives is the relocation of government centers in provinces, which is now being proposed for Metro Clark. It can serve as a provincial headquarter to immediately respond to the needs of the citizens without having to physically head to Metro Manila. Significant improvement in the standard of living can be expected in both Metro Manila and emerging cities through these decongestion acts.

 

Advancing infrastructure construction

The acceleration of the government’s investments in local infrastructure was facilitated by the launch of the ‘Build, Build, Build’ program. Its main purpose is to provide intensive public infrastructure investment in all provinces, cities, municipalities, and barangays in the country. With the development of big-ticket infrastructure projects like the Davao-Samal Bridge, MRT-7, CALAX, Cebu-Cordova Bridge, and Metro Cebu Expressway situated in most emerging cities, easier accessibility and mobility are becoming a reality. Having the right infrastructure in place can boost local employment and tourism, reduce the cost of doing business, and improve the delivery of basic social services. 

 

Exploring township opportunities

Due to land scarcity for construction development in Metro Manila, local and major developers are continuously searching for strategic places wherein they can expand their businesses and diversify their portfolio. Aside from construction and development of single, independent projects, developers and investors have now integrated a number of mixed-use developments in one master-planned area called ‘township’ in these emerging cities. The proliferation of townships could spur the growth of local economies as they attract business activities with their “live-work-play” perspective.  Furthermore, it could encourage provincial workers and new graduates to stay in their province as large-scale developments like townships provide opportunities for employment. By investing in townships, property owners and end-users can enjoy convenient and quality living in an area within the vicinity of their work.

 

Strengthening the IT-BPM industry

The IT-BPM industry has consistently been one of the economy’s growth drivers for many years. With the imposed moratorium on processing of applications for new economic zones in Metro Manila, BPO firms eye expansions in new investment hubs outside the metro. An estimate of 25% of BPO industry employees are based outside the metropolis, primarily in Clark, Iloilo, Cebu, Bacolod, Puerto Princesa, and Davao City, which proves its growing reach in emerging provincial areas. In terms of cost competitiveness, average office rental rates in these cities range from PHP 350 to 600 per square meter per month compared to Metro Manila’s average rental rate of PHP 900 to 1,200 per square meter per month in key business districts. Although the COVID-19 pandemic has threatened the industry’s operations for the past 3 months, the IT-BPO industry is still expected to drive real estate industry growth and continue with their expansion in emerging cities

 

With Metro Manila still staggering in this critical period, the attractiveness of emerging cities as investment destinations has been in the limelight. These locations have the potential to experience the same economic growth and opportunities as Metro Manila, or even better, in terms of livability, connectivity, ease of doing business, tourism, and various aspects of a developed city.

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