Transportation infrastructure encompasses a wide variety of technological improvements that have helped to streamline the delivery of goods and services. Freight transport, as well as passenger transportation, have experienced significant advancements in recent years. The Internet has further facilitated improvements in freight transportation by providing logistics providers with the ability to monitor their clients’ logistics in real-time as well as ferrying people around. Real-time tracking has also made it easier for companies to optimize their real estate investments, which can help real estate agents market properties to current and prospective clients.
In a world that requires people to move at a fast-paced speed, it is no doubt that transportation infrastructure is among the key conduits that fuel trade and investment in the 21st century. However, at what cost can this affect the real estate industry?
The Multi-dimensionality Of Property Values
As direct as it sounds, the weight of real estate is mainly dependent on three factors: demand, availability, and utility. Real estate holds no weight if it is abundant yet not effectively demanded and if the utility is non-existent.
For the people to see the worth of a real estate property, it should satisfy their needs and desires, all the while having a calculated degree of utility and scarcity. In turn, this determines its monetary equivalent, or in simpler words, its property value.
However, determining property values is no easy feat. It revolves around several factors associated with a property’s location, local neighborhood, transportation network, environmental quality, and potential for future developments, among others. Interconnecting these factors together is infrastructure.
Between Property Development and Transportation Infrastructure
In real estate and property development, transportation infrastructure investments are among the strongest catalysts of demand due to their ability to spike property values. Areas with efficient access roads, telephone lines, abundant electricity, water supply, as well as an effective drainage system are bound to have more appreciated property values. This is because of their ability to enhance a locality’s mobility, trade efficiency, and employment opportunities.
Hence, properties with emerging potentials for transportation infrastructure developments are highly likely to be more attractive options for both property investors and prospective homeowners. All of these eventually result in heightened economic productivity evident in multiple sectors of the locality.
Focusing On Transportation Infrastructure
To understand the importance of transportation infrastructure in property value, there needs to have a defined time-distance relationship between a property and its surrounding neighborhood. More commonly known as the location, such linkage, when combined with user movement patterns allows one to gauge a property’s ability to serve the typical real estate users in a neighborhood. For example, linkages with office, commercial, and educational institutions deem to be the most important with single-family residential neighborhoods. Therefore, developers need to determine neighborhood conditions and trends that may enhance or detract property values, one of which is public transportation.
Especially in properties where private vehicles are uncommon, public transportation is a vital element that naturally makes transportation infrastructure just as important. In Kenya, for example, the travel time from Kiambu to Nairobi Central Business District used to be over two hours from 2010 to mid-2012. Upon the completion of the Thika superhighway, however, travel time was reduced to half an hour on-peak hours and fifteen minutes off-peak hours, which not only resulted in immense convenience, but also sparked a rapid increase in real estate values of the properties situated along the area.
However, there are instances when the possibility of an improved transportation infrastructure may endanger a property’s investment potential. In South Yorkshire (UK), for example, the construction of a super tram resulted in reduced house prices, the said issue eventually eliminated upon its completion. A more permanent adverse outcome of transportation infrastructure development can be more evident in locations with newly constructed railway lines. In Hong Kong, for instance, transaction prices became heavily dependent on a property’s distance from the railway line. While such prices eventually improved, they only applied in areas not located on the railway line itself.
The Business of Transportation Infrastructure Technologies
Modern transportation management systems allow for the transportation of goods over great distances. This increased connectivity has resulted in increased business opportunities for producers and retailers. However, new and developing technologies are making it increasingly difficult for transport managers to make the right decisions about transportation infrastructures and software. As a result, businesses may be losing access to transportation management information and could face serious competitive disadvantages.
The increase in cross-docking also increases the demand for efficient trucking infrastructures. Trucking applications represent one of the largest users of transportation management systems. It may be difficult for transportation managers to determine the appropriate transportation configuration. Without reliable infrastructures, drivers face substantial difficulties when faced with delays or other inconsequential events that affect the loading and transportation of goods. Additionally, transportation managers face challenges with scheduling their loads. Without advanced software, it is nearly impossible for managers to properly schedule transport and their loads.
The failure of transportation infrastructures has resulted in many unforeseen consequences. Not only have businesses lost access to reliable transportation management information, but they may have also incurred significant competitive disadvantage. In most cases, transportation managers are unable to determine the optimal load factors for their cargo transport operations. Moreover, companies that fail to invest in transportation management systems face the risk of being left in the lurch when unexpected events threaten their cargo transportation operations. For example, if a major transportation business suffers a failure, customers would not be able to receive their products, and the company may even experience bankruptcy proceedings.
Today’s modern business environment requires efficient transportation infrastructures to ensure that businesses operate smoothly. As a result, large companies have begun to incorporate transportation management systems into their overall business strategies. As infrastructures continue to improve, modern businesses will no doubt experience significant competitive advantages. These superior systems will allow companies to take on new transportation challenges and to increase profits.
How The Philippines Is Catching Up
Filipinos are no strangers to the “Build, build, build!” catchphrase of the present administration, which eventually materialized into roads, bridges, airports, seaports, railways, and other forms of transportation infrastructure developments.
As recent as February 2021, the Department of Transportation (DOTr) eyes two new railway projects in hopes of minimizing the inconvenience and financial losses caused by the long-existing traffic congestion in Metro Manila. The agency has now initiated the bidding for a general contractor for the extension of LRT-2, which is planned to have three additional stations in Divisoria, Tutuban, and Pier 4. On the other hand, LRT’s east extensions in Marikina and Antipolo are expected to start their operations on April 26 this year.
Branching out from railway projects, infrastructure developments bound to transform Central and Southern Luzon are also under the works. As of 2021, the country eyes eight projects ranging from airports (Sangley International Airport), expressways (Subic-Freeport Expressway, Cavite-Tagaytay-Batangas Expressway), bridges (Bataan-Cavite Interlink Bridge), and more railways (LRT-1 Cavite Extension, LRT-6, Subic-Clark Railway, North-South Commuter Railway). Aside from convenience, these developments are bound to expand every property developer’s horizons for high-value properties outside Metro Manila, where larger cuts of land, open spaces and greater investments are expected to yield promising returns.
Should Transportation Infrastructure In Real Estate Instigate A Sense Of Urgency?
It is no doubt that the direct bearing of transportation infrastructure in molding a locality’s economic growth may have partaken a new sense of urgency that calls for increased infrastructure, especially in developing countries where availability can be drastically low. However, the abundance thereof may result in possible property saturation along areas with desired infrastructure networks.
When confronted with the announcement of a big infrastructure project, for instance, an airport, it is no surprise how this may lead to temporary market saturation as employees move into nearby housing units available within the area. This is where the fate of potential properties shift from mere location and infrastructure networks to the calculated foresight of individual property developers and homeowners.
Although infrastructure development is more of a large-scale commitment that involves national camaraderie, both property developers and landowners can anticipate the appreciation dynamics of their desired properties before investing in one, more especially if it is located along a major infrastructure upgrade or a future infrastructure development is expected to take place. By carefully analyzing its projection in relation to supply, demand, and financial viability, one can eventually find a property investment having an unprecedented premium attached to it.
By the way, if you are thinking about generating financial capital by using real estate property as collateral, you may want to know more about Republic Act or RA No. 11057 also referred to as the Personal Property Security Act (PPSA) first.
How do you think we can further improve our transportation infrastructure? Please comment below to share your thoughts.
