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News Release


Jones Lang LaSalle’s 2Q13 Commercial Property Market Survey Highlights Taipei


  • Global economic turmoil and the potential uncertainties posed by the tapering off of quantitative easing (QE) have continued to affect the sentiment of business corporations. Additionally, official economic growth was 50.0% lower than forecast, which indicated that the economy was anemic and that a slowdown was likely to occur in the near future. Thus, corporations have become conservative and cautious on rental decisions. Average take-up has decelerated this quarter falling from 16,000 pings (53,000 sqm) to 3,722 pings. The majority take-up in Q2 was due to one multinational insurance company taking up nearly 2,700 pings space in the Non-Core sub-market. Other occupiers were companies renting small-to-mid-size offices and owner occupancies. The overall vacancy rate decreased marginally by 0.71 pps q-o-q to 10.29%.


  • In the current economic conditions landlords of new buildings tend to raise rents above the market level and, as a result, corporate tenants tend to maintain their current leases. This has helped existing buildings to maintain low vacancies. Overall rents increased slightly by 0.45% q-o-q to NTD 2,444 per ping per month due mainly to certain landlords with low vacancies increasing rents.


  • The Jones Lang LaSalle market survey has indicated that several Grade A office tenants have migrated to city fringe locations this quarter such as Neihu and New Taipei City. Furthermore, many businesses have started considering or relocating to Grade B offices or the city periphery seeking lower rents. Our Grade B office records showed a minor decrease in the vacancy rate of 0.56 pps q-o-q to 7.10%. The average rent was NTD 1,741 per ping per month.


  • Due to certain landlords releasing previously reserved space and because only small-to-mid-size units were in demand in the Xinyi sub-market, the vacancy rate edged up 0.1% q-o-q to 13.9% in 2Q13. Net take-up was the negative amount of -105 pings. Despite the minor increase in the vacancy rate, if vacancies in existing buildings and in new supplies were calculated separately, it was found that the vacancy rate of existing building was only 9.85%. Hence, while buildings with relatively low vacancies dominated the market, certain landlords increased rents upon lease renewals causing average rents to rise 0.1% q-o-q to NTD 2,774 per ping per month.


  • Leasing activity in Dunhua North sub-market was dominated by domestic businesses leasing small-to-mid-size offices. The vacancy rate continued to fall and certain landlords with low vacancies increased their rents causing average levels to increase marginally by 0.5% q-o-q to NTD 2,255 per ping per month.


  • Dunhua South maintained the lowest vacancy rate across all four sub-markets. Although there were no new leases signed this quarter, expansion by MNCs and owner occupancy still drove the rate downwards by 1.1 pps q-o-q to 5.6%, the lowest since 2009. Similarly to the two sub-markets already mentioned, landlords with high occupancies increased their rents, driving up the average 1.2% q-o-q to NTD 2,447 per ping per month.


  • Vacancy has continued to drop in the Non-Core sub-market due largely to new leases signed by MNCs and local corporations. Among these, one foreign insurer has taken up nearly 2,700 pings and the average vacancy rate has been driven down 1.6 pps q-o-q to 6.6%. As for rents, since certain landlords increased their rates, overall rents have increased 0.5% q-o-q to NTD 1,930 per ping per month and are at their highest level since 2010.


 Future Trends     

  • The economic side effects of the European sovereign debt crisis, austerity, trade imbalances, and high unemployment rates have continued affecting global consumption and blocking economic recovery. In addition, the June HSBC manufacturing PMI for China, the major import/export destination for Taiwan, indicated a further drop to 48.2, which was the lowest value for nine months. It is projected that falling orders and rising stocks are likely to continue influencing the Chinese manufacturing sector in the near future. Thus, businesses have become conservative and have taken various measures such as introducing layoffs, making budget cutbacks, surrendering office space, and relocating, to reduce operation costs. For the office leasing market in particular, after considering the current economic slowdown and moving and decorating costs, corporate tenants are likely to continue maintaining their current leases or seeking cheaper office leasing opportunities. Buildings with low vacancies are likely to continue dominating the market. 
  • Take-up for 1H13 reached 19,044 pings, 8,000 pings higher than in 1H12 and more than the total take-up of 11,775 pings in 2012. However, this was due mainly to the completion of several buildings and owners moving into self-owned buildings. Owner-occupancy contributed nearly 50% to the 1H13 take-up. However, after removing owner-occupancy from the take-up calculations, we found slow leasing activity in general. For 2H13, one to three additional buildings are expected to enter the market at least one of which is planned to be fully owner occupied. Take-up is expected to increase further this year.
  • As previously mentioned, since buildings with low vacancies are likely to continue dominating the market, landlords are expected to continue adjusting rents. Overall rents are likely to remain stable or increase at a moderate pace.


  • Our market survey has indicated that some tenants have relocated to offices on the city fringes such as Neihu and New Taipei City. At end-2013 and in 2014, additional metro rapid transit service routes are planned to become operational, and it is anticipated that more corporate tenants may be attracted to grade B or other classes of office space in the peripheral areas along these service routes.
  • In terms of future office space demand, and according to official statistics of the Investment Commission of the Ministry of Economic Affairs, a total of 56 Chinese business entities applied for investment in Taiwan in the first five months of this year. Total investment has now reached USD 2.1 billion, with an 82.0% increase y-o-y. Therefore, continued efforts to improve cross-straits trade relationships and the lowering of service sector trade barriers are likely to bring more Chinese businesses to Taiwan, and this in turn will boost demand for office space. Our records also show that financial service entities have started making enquiries for office space in the Xinyi and Dunhua South sub-markets.
Joe Lin (Local Director) made the following comments:
“On making a comparison with major cities in the Asia Pacific (AP) region, we can see similar trends in the office leasing market with take-up decreasing in general except for Beijing and Shanghai. During the current economic slowdown, business sentiment has tended to remain conservative and cautious in making lease plans. Since most corporate tenants intend to maintain current lease terms, vacancies have remained stable while general leasing activity has shown deceleration across the AP area. It is also worth noting that the new leases signed have been mostly for small-to-mid-size units in the major CBDs. Increasing numbers of corporate tenants have now started considering or even relocating to office space in Grade B buildings or to offices on the city fringes. However, rental performance has remained stable in the AP region, and movements have fluctuated within a positive or negative 1.0% range. One other thing to note is that, despite the current slowdown, this quarter we have seen financial service entities continuing to seek office space and expansion opportunities in Hong Kong and Taiwan.
In terms of domestic office demand, and due to the present economic conditions, corporate tenants are likely to maintain existing leases but, in the long run, it has been noted that several corporations have started drafting plans for office consolidation. The purpose of consolidation is to reduce costs by relocating a number of departments/divisions to one single location. Thus, rent will continue to be the primary concern when considering leasing office space. Furthermore, Taiwan’s Financial Supervisory Commission will grant domestic insurance companies the right to acquire commercial properties in the near future. However, it has stipulated that the minimum rental yield requirement must be 2.875% (the current market yield is 2.0% to 2.5%) as one of the prerequisites for purchases. The higher yield is likely to affect the overall rental performance to a certain extent.”
Investment Market
  • In 2Q13 the investment volume in the commercial property market shrank significantly by 37% q-o-q to NTD 16 billion and this volume was nearly 47% less than that of 2Q12. Apart from the current gloomy global economic situation and the uncertain future, the local investment restrictions by the Financial Supervisory Commission (FSC) have still impacted investment market sentiment. Most potential investors are consequently taking a more wait-and-see approach while capital-rich insurers are prohibited from most investment activities, causing the investment volume in 2Q13 to fall. According to Jones Lang LaSalle market research, and as in the last quarter, some sales were made by companies wanting to reduce debt, reactivate assets and increase available funds.
  • Regarding the distribution of investment in property types, office space that typically accounts for 30-50% of quarterly transaction volumes contributed merely 11.1% of the total transaction amount in 2Q13. This was because of the gloomy economic situation and the investment restrictions on domestic insurance institutions. As a result, retail properties and industrial offices became more popular and accounted for 35.8% and 41.4% of total volume, respectively. Also, it was noteworthy that there was little investment in hotel properties over the previous three quarters but in 2Q13 hotel investment accounted for 11.7% of the total transaction amount.
  • On taking a closer view, it can be seen that those retail and hotel deals concluded this quarter are mostly located in the metropolitan areas of northern, central and southern Taiwan where there are established business/tourism activities. Given that the Taiwanese Government has continuously relaxed the restrictions on Mainland Chinese capital, made it easy for Mainland Chinese independent tourists to visit and enthusiastically promoted the Taiwanese tourism industry, some investors might well have turned their attention to retail and hotel properties.

  • Although it is unusual for major transactions to take place in Xinyi District, this quarter witnessed a single-unit commercial office deal done in the newly-completed Farglory Xinyi Financial Building with the price paid being a historical high. This is likely to be an individual case but it indicates that investors have seen a positive future for Xinyi District and will consider its potential.
  • In addition, a Mainland Chinese government corporation has acquired an office for self-use in the Dunhua South sub-market, becoming the first Mainland Chinese government organisation to establish itself in Taiwan’s capital city. Given that the cross-straits economic connections have gradually improved, mainland Chinese capital is expected to increasingly flow into the island, giving impetus to the growth of the Taiwan real estate market.
  • Moreover, at end-June 2013, the Ministry of Finance announced that insurers, apart from being allowed participation in infrastructure projects, would be permitted to manage non-insurance businesses from which they were previously excluded. Also, in the future insurance institutions may be able to outsource their back-operations to outsourcing companies.
Tony Chao (Managing Director) made the following comments:
Generally speaking, the commercial office market in 2013 is likely to improve in a moderate pace.  Concerning the gradually growing leasing market, abundant capitals and investment restrictions, Taipei commercial property market’s market yields have progressively become practical. Moreover, it is believed that the market will develop to an even healthier stage with more and more cross-Strait collaborations being realized, especially in the finance, tourism, retail and health care industries, enhancing both Taiwan’s economic and real estate development.