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News Release

Jones Lang LaSalle’s 3Q12 Taipei Grade A Office Market Survey Highlights


Taipei, 9 October 2012 - In 3Q12, the average vacancy dropped to 10.07%, a slight decrease of 0.1 percentage points (pps). In the quarter, total take-up fell considerably from 12,445 ping (41,140 sqm) in 2Q12 to 782 ping. The circumstances of the depressed global economy pushed corporate tenants to adopt a wait-and-see stance as they approached 2H2012. Consequently, potential new tenants and current tenants, who investigated expansion schemes earlier during the year, now intend to temporarily postpone their projects or downsize them from their original scale. Since there was not a significant amount of new leases, the figures for the average rents only showed marginal fluctuations among the four sub-markets. Overall, in 3Q12, rents are most likely to be similar to that of the previous quarter and remain close to NTD 2,387 per ping per month.
  • Vacancy in the Xinyi sub-market registered a minimal drop of 0.1 pps q-o-q and fell to 11.09%, which is a marginal decrease from the figures of the previous quarter. Leasing activities were mostly dominated by the expansions of MNCs and some new leases signed by tenants from foreign IT and telecom companies, which drove average rents to rise slightly by 0.2% q-o-q to NTD 2,701 per ping per month. Given the sluggish economy, the leasing investigations of MNCs in this sub-market were slower than the previous quarter
  • Since 1Q12, the Dunhua North sub-market has experienced a rise in vacancy. Due mainly to some tenants who terminated their leases in Dunhua North in 2Q12 and relocated to self-owned spaces or newer buildings in other sub-markets, vacancy in 3Q12 rose a further 0.5 pps q-o-q to 13.06%. In addition, as landlords released owner-occupied spaces and demand became weaker in general, vacancy in Dunhua North continued to climb. The average rent in 3Q12 fell by 0.4% to NTD 2,208 per ping per month
  • Some MNCs, which moved in to spaces in the Dunhua South sub-market, caused the vacancy rate there to fall by 0.4 of a percentage point to 8.26%. Landlords of buildings with high vacancy rates became more flexible while negotiating rent incentives, causing the average rent to marginally decrease 0.4% q-o-q and register NTD 2,404 per ping per month.
  • Vacancy in the Non-Core CBD sub-market dropped by 0.6 pps q-o-q to 7.59%, the largest decrease recorded in all four sub-markets during 3Q12, causing the sub-market to remain as the one with the lowest vacancy for the second consecutive quarter. Compared to the other three sub-markets, the discounted rent packages appealed to certain MNCs, driving the average rent to grow by 0.2% q-o-q to NTD 1,883 per ping per month..
Summary of 3Q12 Rents and Vacancy Rates in the Grade A Office Market:




  • Since 1Q11, in the Taipei Grande A office market, vacancy ehas declined for seven consecutive quarters. It is worth noting that the take-up has been considerably concentrated in the Xinyi and Non-Core CBD sub-markets, signifying that the ‘M-mode leasing demand’ is ready to appear again.
  • Starting from earlier this year, the Xinyi sub-market, which is situated in a prime location, has seen substantial take-up, with most tenants coming from MNCs and financial institutions. Despite that demand in the sub-market slowed in 3Q12, corporate tenants with higher budgets still considered the Xinyi sub-market to be the best choice for location.
  • Within the Non-Core CBD sub-market, due to the fact that the MRT Songshan Line is scheduled to be operational by end-2013 and the rents in the sub-market are relatively affordable, a certain number of buildings on Nanjing East Road were attractive locations for companies that had to consider costs. This resulted in a considerable amount of take-up, which mainly came from local businesses and Japanese firms.
  • Given the current slow-down in economic activities, landlords again began offering favourable rent packages, causing the momentum of rents to gradually slow down. In the short-term, we expect that corporate tenants will spend more time on making their leasing decisions. Therefore, instead of experiencing significant changes, the outlook of the Taipei Grande A office market is likely to remain stable or see only marginal adjustments.
  • The accumulative take-up of the first three quarters this year has been estimated at 13,000 ping, implying a 4,000-ping decrease from the 17,000 ping recorded in the same period (1Q~3Q) in 2011. Given the amount of scheduled market supply, the gloomy economic outlook from all perspectives and the cautiousness of corporate tenants concerning future uncertainties, it is predicted that demand in the short term will likely be slow and owner-occupiers will be responsible for the majority of the take-up. As a result, overall, the take-up of Grade A office space in 2012 will likely be similar to that of 2011 and register at around 23,000 ping.
  • In addition, recently, a certain number of potential tenants have investigated the Neihu industrial offices, which are regarded as the extension of the Taipei Grande A office market. The estimated vacancy in the Xihu section is lower than 5%. Likewise, buildings in the Wende section of this market have almost been filled. By referencing the future new supply and owner-occupied spaces that landlords from the local IT industry have released, it has been predicted that the rents in Neihu industrial office market, which are fairly cheaper, may draw more corporate interest about moving in to spaces there.
Joe Lin (Local Director) made the following comments:
Our global research indicated that slow leasing activity and modest rental movements were seen in 3Q12 across major markets in Asia Pacific. In general, flagging demand was mainly on the back of corporate caution and slower economic growth. For instance, in China, expansion by both multinational corporations (MNCs) and domestic firms slowed; in India, expansion by some MNCs has stalled, although local occupiers remained keen to take advantage of tenant-favourable conditions to consolidate or expand; more returning space arose in Hong Kong and Singapore because of the financial sector contraction. No matter from the perspective of Asia Pacific cities or only in respect of Taipei’s four submarkets, a hybrid performance has been seen.
More specifically, in 3Q12, Taipei’s average vacancy rate decreased marginally by 0.1 pps q-o-q to 10.07%, which was lower than the average vacancy rate for Grade A office space of 14.92% seen in Shanghai, but slightly higher than Singapore’s 8.68%, and much higher than Hong Kong that has vacancy rate at around 3.49%. Besides, it is noticed that compared to 2Q12, unlike the increase of vacancy rates in Hong Kong and Shanghai, Taipei and Singapore remained the falling vacancy rates..
In July and August 2012, newly approved foreign corporations in Taiwan increased to a cumulative 69 units. According to our records of new leases for 3Q12, at least four foreign-funded enterprises opened new operational offices in the Taipei market, leasing a total of more than 900 ping. With the signing of a cross-strait investment protection pact and the deepening of cooperation in cross-strait financial business, it is expected that the stable growth of mainland Chinese firms and MNCs and the demand for commercial office space are likely to be more apparent as businesses start the setting-up process.
Investment market:


  • The investment market in 3Q12 continued the dynamic sentiment from last quarter. Together with the abundant domestic capital and the consequences of the third round of quantitative easing policy (QE3) implemented in the United States later this quarter, the capital market was noticeably energetic. Our Investment Survey indicated that the total transaction volume of commercial real estate in 3Q12 amounted to TWD 54.7 billion, increases of 82.5% q-o-q and 7.16% y-o-y.


  • Those financial/insurance institutions that have been investigating suitable assets were still the most active investors, accounting for approximately 55% of the total transaction amounting to TWD 30 billion, followed by property developers that contributed TWD 17.1 billion to the market or 31% of total transaction amount. It is worth noting that despite the Financial Supervisory Commission (FSC) raising the minimum rental yield on real estate investments from 1.875% to 2.215% in mid-August, vendors have not decreased the asking prices. As a result of serious competition among potential purchasers triggering higher property prices, it is most likely that the winning purchasers will have to modify current leasing contracts in a bid to meet the statutory requirements in terms of minimum rental yields.
  • Moreover, at a time of weakening European and American economies, global cash flows increasingly came to Asia Pacific region. In 3Q12, foreign capitals have purchased some remarkable investment projects, totalling TWD 7.4 billion or 14% of the total transaction volume. As in recent years, Asia Pacific private funds have been successively entering the Taiwan property investment market. Also, as the cross-strait relations improve, loosening investment restrictions, we expect investment sentiment to strengthen further.
  • In addition, because the subjects of high-quality commercial properties were limited, this quarter, significant amount of capital was invested in land sales there was a significant amount of capital invested in land sales, totalling more than TWD 42.8 billion.
  • It is observed that large and complete lands in the Greater Taipei area have been pretty much occupied. Meanwhile, traditional industries, government-owned corporates and government public sectors have released leasehold lands to revitalise assets. Property developers and insurers are optimistic about the future development potentials, preparing sufficient funds to secure those projects.
  • Given the growth of tourism market opportunities, insurance and foreign capital institutions have continuously looked at suitable retail properties, contributing a total of TWD 9.81 billion. Besides, as prime investment subjects in Taipei are nearly scarce, investors have started to move to the south, enthusiastically scrutinising the Taichung and Kaohsiung markets. This not only warms up the real estate market in the central and southern Taiwan, but also brings about some innovative energy for regional development.
Tony Chao (Managing Director) made the following comments:
Although the global pessimistic economic sentiment has strong impact on the performance of commercial office leasing market, driving most investors to be more cautious when making decisions, domestic capital is sufficient, and the implementation of QE3 has underpinned the current investment sentiment, the investment market apparently has become more dynamic.
Additionally, Taiwan’s investment environment has been ranked the fourth best among 50 countries and the second best in Asia, according to the latest 'Business Environment Risk Intelligence (BERI) report. As the nation is actively working on the improvement of trade relations with other countries and on stably enhancing its cooperation with Mainland China, we therefore anticipate an optimistic outlook for Taiwan’s commercial real estate and investment market performance.
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