Skip Ribbon Commands
Skip to main content

News Release


JLL 2Q2015 Taipei Grade A office review

Stabilise leasing demand continued to push rents upwards

 Quarterly Trend
Global economy continued to stabilise with uncertainties ahead, mainly stemmed from the effects of low inflation and potential interest rate hike in the US and Eurozone, slow demand and growth pace in China, MERS virus in Korea, and geopolitical issue in the Middle East. These uncertainties have decreased imports and exports in the AP region as well as rendered businesses to stay cautious in operations. Thus, operational spending, such as rents, has still been one of the primary concerns when determining leasing schemes.
The average take-up for 2nd quarters in the past five years is around 4,000 ping (13,200 Sqm). However, take-up recorded at 9,498 ping this quarter implying the leasing demand remained robust. Most new leases committed in 2Q15 were primarily on small-to-mid sized office units except one new lease transaction signed on a large unit (over 2,700 pings) in the Dunhua South submarket by a domestic airliner.  Thus, overall vacancy decreased 1.5 percentage points (pps) to 9.3% this quarter.
Rental growth stabilised as building owners slightly adjusted rental amounts upwards while vacancies continued to fall. Overall rents increased moderately by 0.4% q-o-q to NTD 2,588 per ping per month, an increase of 1.9% on the annual basis.
Jones Lang LaSalle market survey also discovered grade B office posed a similar trend as the grade A office market. Leasing demand continued stabilising pushing vacancy to drop by 2.0 pps to 4.8%. Rental growth recorded a 1.5% increase reaching NTD 1,776 per ping per month. Most demands were from corporate tenants in the food and beverage services, retail and tourism industries.

Future Trends
 As the global economy showed convincing signs of recoveries, business sentiments and corporate confidence have both improved. International employment research firms conducted an employment survey on the hiring intentions for business entities of all sizes in Taiwan. The result showed that 47% of the businesses have intended to increase staff level in the next quarter, particularly for businesses in the finance, real estate, retail, transportation and utility sectors. We have also received enquiries on space availabilities in Taipei city and its peripheral areas. It implies that leasing demand in the future has remained robust.
Office lease in major CBDs will primarily focus on small-to-mid sized units, while demands for larger office units are projected to move to the Non-core CBD and city fringes. Our survey indicated that corporate in the finance and high-tech industries have actively engaged in pre-lease activities, especially in the upcoming new supplies in city fringes. Several new buildings under constructions in Nankong and Songshan areas are nearly fully occupied before completions. For instance, TransGlobe Life insurance of the AEGON Group leased a 14,000 ping unit in Songshan which is the largest office space ever leased in one single deal. We project that as new buildings in city fringes are reaching full occupancies, potential tenants are likely to divert their attentions to buildings in the Xinyi submarket or certain areas in New Taipei City. Additionally, as increasing international mainstream retailors established operations in Taiwan, we have seen potential tenants enquiring space availabilities in the upcoming new supplies in the Xinyi submarket. Growth momentum is likely to be sustained.
There have been 55,000 pings of new grade-A office supplies planned to be complete at this yearend; around 50% of which is planned for owner occupancies. Vacancies are likely to increase moderately in 4Q15.

Performance by Sub-markets
  • Xinyi submarket was still preferred by corporate tenants; over 45% of the new leases signed this quarter were committed here. The vacancy dropped 1.8 pps q-o-q to 6.8% with net take-up reaching 4,445 pings. As vacancy continued to decrease, buildings with nearly full occupancies increased rents pushing the area’s average rent to increase 0.7% to NTD 3,039 per ping per month. The increase has been the seventh quarterly consecutive increase.
  •  Leasing activities moderated down in Dunhua submarket this quarter with take-up decreased from 1,598 ping in 1Q15 to 431 pings this quarter. However, the area’s vacancy continued to drop by 0.4 pps q-o-q to 8.1%. The average rents also increased 0.2% on the quarterly basis to NTD 2,316 per ping per month.
  • ​Due to domestic airliner established regional branch leased a large office unit in Dunhua South, the overall vacancy for the area decreased 3.4 pps q-o-q to 7.0%, take-up reached 4,296 pings. However, the average rent remained levelled at NTD 2,482 per ping per month.
  • ​Demands from the financial services, e-commerce and fashion industries took up small office spaces in the Non-Core CBD this quarter. The vacancy dropped slightly by 0.2 pps q-o-q to 9.6%. Similar to other submarkets, landlords with decreasing vacancies slightly increased rents pushing the average rent to increase 0.2% q-o-q to NTD 2,016 per ping per month. 
Table I: Taipei Office Market Key Indicators 
 Gross Achievable Rent (NTD/ping/month)





Vacancy Rate




Dunhua North2,3160.2%1.2%8.1%-0.5%431
Dunhua South2,4820.0%0.4%7.0%-3.4%4,296
Non-Core CBD2,0160.2%4.1%9.6%-0.2%327
Taipei  2,5880.4%1.9%7.7%-1.5%9,498

Brian Liu (Associate Director) made the following comments:
Jones Lang LaSalle Global Market Perspective 2Q15 indicates that leasing market in Taiwan displayed a similar trend as most major markets around the globe. Under the current economic stabilisation, employers have intended to increase staffing levels, thus, corporate tenants in cities like London, New York Hong Kong and Tokyo have started to look for larger leasing units. Since vacancies in most of these cities have dropped to single digit, therefore, before large influx of new supplies entering the market in 2016, rental values are likely to continue increasing. On the regional side, demand has remained strong with net take-up increased 31% y-o-y in 1Q15 in the Asia Pacific region. Leasing demands were primarily from finance. high-tech and IT industries. Vacancies in cities such as Hong Kong, Tokyo, Taipei, and Manila dropped under 10%, tenants have started seeking space availabilities on outer rims of these cities. The current overall vacancy for the AP region is 10.8%. It is projected upon completions of most new office supplies in early 2016, the vacancy would increase to around 11%. In terms of the rental performance, the regional average rent increased 0.6% q-o-q, annual growth reached 2.6%. It is projected that rents in Singapore and Taipei would face price adjustments as new supplies released at 2015 yearend.
On the domestic front, the vacancy for the grade A reached a low point, most of the existing buildings were nearly fully occupied. Building owners of these buildings are likely to increase rents. Additionally, since new supplies often raise asking rents higher, we projected the rental growth would be around 2-3% in 2015 yearend. As increasing new supplies entering the market, corporate tenants have increasingly choices for leasing, thus, aging buildings are likely to face greater competitions or needs to renovate in the near future.

Investment Market
  • Investment volume totalled NTD 10.7 billion this quarter, a decrease of 0.6% q-o-q, or decreased 63.1% y-o-y. The average transaction volume for the past six Q2’s, this quarter has been the lowest transaction volume. Due to property values in major urban areas are high while rental growth is relatively slow to match up, yields have not been adequate for investors to deem feasible. Moreover, official controls are still in effect for insurers investing in commercial real estate, therefore, there was not significant investment activities from the this quarter. On the supply side, over 50% of the sellers this quarter sold their properties to restructure corporate finance or to obtain operation funds. ​
TP Q2 figure 1.jpg
  • The major investment types in 2Q15 were industrial real estate occupying 85% of the quarterly total transaction volume. Other property types included offices, and retail properties occupying 9.0% and 6.0%, respectively. (Figure 2)  Most buyers were in the tech, electrical, and other light industrial businesses. There were only two insurers buying few office units for investments, others transactions were mostly for owner occupancies.
TP Q2 figure2.jpg
  • The major investors were corporations, insurers, and private individuals this quarter. (Figure 3) One thing to note is that unlike previous years where most transactions took place in the Greater Taipei area, around 86% of the transactions were outside of the Greater Taipei area this quarter. ​
FIGURE 3.jpg
  • Land transactions reached NTD 20.4 billion, more than the volume of direct real estate investments. Most land purchased was for owners’ self-use or for developers to building residential buildings for sales. Besides direct building acquisitions, it is seen insurers started purchasing lands for investment. Our record indicated that one of the major domestic insurers purchased a parcel in Taichung investing around NTD 910 million.
Tony Chao (Managing Director) made the following comments:
Jones Lang LaSalle Global Market Perspective for 1Q15 showed the global real estate transaction volume totalled at USD 155 billion in 2Q15, increased 9% on the annual term. Regional real estate volume reached USD 25 billion, an increase of 7% y-o-y. It is noteworthy Chinese investors continued to conduct cross-border investments more than domestic investments. The investment reached USD 4.3 billion, increased 160% q-o-q. However, global cross-border investment decreased 5% q-o-q to USD 58 billion. However, first quarters have normally tended to be quieter for the investment market. We have anticipated a further growth of 5% in the global transaction volume reaching USD740-760 billion in 2015. Most investments would continue to focus on retail and office structures.
In terms of domestic investors, Taiwanese institutional investors invested USD1.1billion in foreign properties last year. While two quarters into 2015, domestic insurers have already invested USD 1.5 billion in London office buildings. According to the financial reports of top ten insurers this quarter, the total funds available for them to invest in real estate reached USD 120 billion, an annual increase of 16.4%. Thus, with abundant domestic funds available for investments, it is imperative for the government to re-examine the various control measures and tax schemes attempting to channel these funds into areas that could foster economic development for the country.