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News Release


Jones Lang LaSalle’s 2Q12 Taipei Grade A Office Market Survey Highlights


Taipei, 4 July 2012 – The average vacancy rate in 2Q12 dropped to 10.2%, a decrease of 2.3 percentage points (pps). Total take-up rose significantly from -378 ping in the first quarter to 12,445 in 2Q12. Of the total take-up, a considerable percentage came from tenants of large spaces moving to better-quality office space in the Xinyi sub-market. In terms of average rents, figures saw a marginal growth of 0.2% to NTD 2,387 per ping per month due to the adjustment of favourable rental packages by landlords following the considerable fall in vacancy rates in the Xinyi sub-market.


  • According to our Lease Volume Survey in 2Q12, of the total, new leases accounted for about 3,100 ping and the local health care industry accounted for the largest amount of take-up among the new leases, at 30.0% of the total. In second place was professional and business services, accounting for 27.0% of the total, with consumer products in third position at 18.0%.


  • Given that the vacancy rate has clearly fallen, landlords reduced incentives in 2Q12 and, along with the gloomy global economic outlook, this caused tenants to temper their preferences for relocation. Thus, as tenants adopted a wait-and-see stance on lease decisions, the number of new leases signed in the quarter was lower than in 1Q12.



  • The vacancy rate in the Xinyi sub-market registered the most significant decrease of the four sub-markets in 2Q12, down 6.1 pps q-o-q to 11.1%. The sub-market also saw the largest increase in take-up over the past three years. As a result of the favourable rental packages offered by landlords in 1Q12, a certain number of new tenants moved in to the area. In addition, current tenants in buildings with an occupancy rate of more than 85% were likely to see increases in rents when renewing their leases, causing average rents to rise slightly by 0.2% q-o-q to NTD 2,695 per ping per month.


  • Following the trend seen in 1Q12, the Dunhua North sub-market continued to see vacancy rates rise, up a further 1.5% q-o-q to 12.5%. This was mainly because some tenants of large spaces terminated their leases and relocated to self-owned spaces or newer buildings in other sub-markets. As the vacancy rate is still within an acceptable range for landlords, rents remained unchanged for the third consecutive quarter at NTD 2,218 per ping per month.
  • In 2Q12, for the eighth consecutive quarter, the Dunhua South sub-market recorded the lowest vacancy rate of all sub-markets, despite a rise from 6.9% to 8.6% as some significant tenants relocated to quality properties in a bid to consolidate their office space. Although rents remained stable in most buildings, due to renewals by current tenants in some buildings with an occupancy rate of more than 85%, average rents rose marginally by 0.2 of a percentage point to NTD 2,413 per ping per month.
  • The Non-Core CBD sub-market was one of two sub-markets, the other being Xinyi, where the vacancy rate fell, down 2.0% q-o-q to 8.2% due mainly to new leases by local corporations. This pushed the Non-Core CBD sub-market past Dunhua South as the area with the lowest vacancy rate. As a result of the new leases by domestic SMEs, rents grew marginally by 0.2% to NTD 1,879 per ping per month.
  • Generally speaking, it has been noted that the climbing vacancy rates in the Dunhua North and Dunhua South sub-markets were primarily the result of tenants that were attracted by the favourable rents in the Xinyi sub-market in 1Q12 and moved there in 2Q12, causing an immediate drop in the vacancy rate in the Xinyi sub-market. Also, as a result of encouraging rental packages, tenants in the health care industry that were originally located in Grade B office spaces started to relocate to Grade A buildings.






  • Given the uncertain global economic outlook and current fluctuations, foreign parent companies tended to ask their subsidiaries to reduce capital expenditure. This pressure to cut costs pushed corporate tenants to strengthen their space efficiency and some financial institutes plan to reduce excessive office space by terminating a number of their leases.
  • Along with the substantial increase in take-up, there were little suitable space available in the market in 2Q12 and landlords seemed to adjust their rental strategies. As a result, tenants were no longer able to move with cheaper rents in pursuit of high quality and instead tended to consider renewing their current leases. However, companies may still seek cheaper space and relocate if landlords increase rents significantly. Given the market supply in 2H12 and tenants’ cautious attitudes towards future uncertainties, the take-up of Grade A office space in 2012 as a whole is likely to be similar as in 2011.
  • Due to the considerably low vacancy rate seen over the past three years, there are no longer as many large areas of vacant space available. Accordingly, landlords are likely to offer fewer promotions. Unless the current tenants of large spaces move out, leaving large areas of vacant space behind, rent reductions are possible. Moreover, as the landlords of buildings with low vacancy rates conduct rental reviews, the trend for a marginal growth in rents is likely to remain over 2H12.
  • The landlords of new Grade A office buildings that are scheduled to complete over the next 1-2 years are asking rents that are still higher than the market price. Further adjustments of rental strategies will depend on the overall economic outlook in order to attract potential tenants.
  • Because of less availability of space and limited new supply, landlords tended to reduce their flexibility in discussing rents with potential tenants. This is expected to remain in place until the end of this year after additional new supply is released. Before then, there will, however, be fewer options for tenants that require large office spaces and, as landlords stop providing favourable rents, the market for new leases is dominated by SMEs. As tenants seem to be less willing to relocate and are relatively cautious about decision-marking, they are more likely to renew short-term leases and look actively at suitable properties in order to support their long-term operational strategies. Some tenants of large spaces have therefore started to assess the suitability of new office buildings that are scheduled to complete over the next 2-3 years. Moreover, future transportation improvements are likely to trigger the movement of decentralisation as well as further drive more office building constructions and life functional enhancements in the suburbs.


Joe Lin ( Local Director ) made the following comments:


Our global research indicates that, in 2Q12, Taipei’s average rents increased marginally by 0.2% q-o-q, which is lower than the average growth in rents for Grade A office space of 1.0% seen in the Asia-Pacific region as a whole. In terms of vacancy rate, although Taipei’s average is still higher than the major neighbouring Asian office markets, the performances of the four sub-markets in Taipei have all shown a trend that there is a lack of suitable options for tenants that require large office spaces, consequently most of them tended to renew their current leases.


In line with the latest cumulative data for April and May 2012 from the Department of Statistics at the Ministry of Economic Affairs (MOE), 18 Mainland China corporations (including those entering via a third country) were approved in the period, a 6.0% increase over the same period in 2011. Meanwhile, given the opening to Investment from Mainland China and the deepening of cooperation in cross-Strait financial business, we are optimistic about the influx of Mainland Chinese capital and its effect on the market in Taiwan, as well as its leading position in the vibrant area of multinational investment.


In April and May 2012 newly approved foreign corporations in Taiwan increased by a cumulative 40 units. According to our records of new leases for 2Q12, at least five foreign-funded enterprises opened new operational offices in the Xinyi sub-market, leasing a total of 900+ ping. With the stable growth of MNCs, demand for commercial office space is likely to be more apparent as businesses start the setting-up process.


Investment Market:


  • The current pessimistic economic indicators in the US and the deteriorating European debt crisis have weakened capital market performance as a whole. As economic recovery is uncertain, the Central Bank of the Republic of China (Taiwan) currently shows no intention of increasing the interest rate, causing investors to search for potential targets. Compared with 1Q12, the investment market in 2Q12 returned to a more active status. Our Investment Survey indicated that insurance institutes that previously held a wait-and-see approach became the biggest investors, accounting for 77.4% of the total transaction amount of NTD 21 billion, followed by the technology industry, which contributed NTD 3.6 billion to the market, or 13.0% of total transaction amount.
  • Given the dynamic market atmosphere, some banks and the securities industry actively disposed of non-core assets and released a certain number of properties, accounting for 16.98% (NTD 4.58 billion) of the total transaction amount. In addition, in the first two quarters of the year, some foreign companies also disposed of their assets. According to our survey data, as of 1H12, the sale of foreign-owned properties totaled NTD 4.65 billion. As real estate rents in Taiwan lag behind asset prices, some corporate owners are likely to sell their self-owned properties and turn to leasing property in order to ensure that they have sufficient funds to enhance their core businesses. We therefore anticipate that those corporations that intend to lease rather than hold space as an asset in 2H12 will sell their properties.
  • Furthermore, as the market is optimistic about the prospects for the tourism industry, the hotel real estate sector saw two transactions in 2Q12, totaling 24.0% of the total transaction amount (NTD 6.48 billion), despite this sector usually accounting for a relatively small portion of the market. Meanwhile, the pressure of inflation has driven investors to secure properties. As market capital has been investigating suitable assets, unlike the pessimistic atmosphere seen in the previous quarter, the total transaction of commercial real estate in 2Q12 amounted to NTD 27 billion, increases of 478.0% q-o-q and 42.0% y-o-y.
  • Although the government has gradually opened investment channels for Mainland China, Chinese investors currently still come under the "5-4-3 regulation". As a result, apart from driving rents up, Mainland Chinese investors seem to have only a limited impact on the market. As far as domestic investors are concerned, the active government policy control on the housing market and the opening of Taiwan to more individual tourists from Mainland China have boosted business opportunities significantly, causing some developers to turn their investment attention to opportunities in the tourism industry, contributing further to the recovery of the hotel real estate investment market and the diversification of real estate development.
  • It is noteworthy that domestic investors are escalating their emphasis on the effective power of urban renewal in the development of their investment targets. For example, the potential added value of development planning and remodelling after urban renewal meant that some of the transactions seen in the quarter attracted the attention of investors that increased their involvement in this sector.