Article

Building the case for cargo-oriented developments in the Philippines

March 13, 2019 / By

Two weeks ago, I had the pleasure to speak in the Asia CEO Logistics Summit where I shared my thoughts on how we have a golden opportunity to shape the real estate landscape through the introduction of cargo-oriented developments (CODs). There is limited literature on the concept of CODs despite its application in Europe, Americas, Australia, and more recently, China.

The Center for Neighborhood Technology (CNT), in their research report titled Cargo-Oriented Development: Analysis and Implementation, defines the concept as: “the development of places that are both multi-modal nodes of freight transportation and centers of employment in logistics and manufacturing businesses.”

Broadly, this means that CODs are industrial hubs that are linked to multiple modes of transportation, mainly road/railway which is connected to either or both airports and seaports, and is managed by a single operator/carrier.

The advantages of a COD are numerous, creating economic, social, and environmental benefits. One good example where COD could potentially impact all three areas is in alleviating traffic congestion in the metro by minimizing the need for trucks on the road through alternative modes of transport (i.e. railway). Japan International Cooperation Agency (JICA) estimates that the country’s losses due to traffic was around Php3.5 billion in 2017 and could reach Php5.4 billion by 2035 if left unaddressed. On the social side, various studies have already pointed out the negative impact of traffic and pollution on employee productivity and health. Lastly, CODs can help reduce carbon footprint by reducing the dependency on the use of trucks on the road and by incorporating green features within the industrial community.

Other benefits of CODs are tax revenue source for local government units (LGUs) where they are located and the ability to build communities around CODs as you would need an office to house these logistics or manufacturing firms, accommodation for workers or business travelers, and retail to support the neighborhood.

This is a timely topic considering the strong government push for infrastructure projects under the Build Build Build program. Last year, the government said  infrastructure spending has reached 6.2% of Philippines’ GDP  and is expected to hit 7.3% by end 2022. This infrastructure boom can be maximised through CODs which brings together infrastructure and real estate developments.

To illustrate the potential of CODs, we used the JLL MapIT platform to plot out the planned PNR North Railway using dummy locations for the proposed stations (orange). We then mapped out select existing and upcoming real estate developments (yellow and light red) in those areas and we could easily identify where CODs can be considered.

This is just for one railway development. There are eight other railways, seven airports, and one seaport in the infrastructure pipeline. Considering the Philippines’ unique position of favourable economic fundamentals, a growing industrial sector, and healthy real estate market, CODs can serve as a catalyst for urban development.

Talk to us 
about real estate markets.