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News Release


JLL 1Q2016 Taipei Grade A office review

Stable demand fostered significant rental growth while investment market remained moderate

​​​​Quarterly Trend

The official statistics showed the economic growth recorded at 0.75% at 2015 yearend; while it further forecasted that the growth would rebound to 1.47% in 2016. During the current recovery, business sentiments have remained conservative and cautious towards spending and payroll expansions. Therefore, in the leasing market this quarter, space surrendering and relocations to other grades of office buildings were observed. A significant drop in the domestic investment volume also occurred.

Leasing demand showed a slight improvement in 1Q16 with the total take-up reached 282 pings from a negative value last quarter. However, the value has been the lowest in the past five first quarters. The demands this quarter mostly concentrated in the new premium grade building located in the Xinyi submarket. Most new leases were committed to small to mid-sized units with a few large deals concluded in the aforementioned premium buildings. The majority tenant types were still centred on finance, IT/high-tech and retail industries. However, due to several landlords released previously reserved spaces, the overall vacancies remained flat on the quarterly basis at 10.6%.  

Despite the moderate demand, there was a significant rental growth due mainly to new leases signed within the new premium buildings posed higher rents and landlords with decreasing vacancies raised rents. It pushed the overall rent upwards by 2.1% q-o-q to NTD 2,641 per ping per month. This increase has been the highest in nine years.

Jones Lang LaSalle 1Q16 market survey also showed the leasing market in city fringes experienced a rather identical trend as the grade A market this quarter. The demands mostly congregated in Neihu Wende Section and the Nankong area. Particularly for Nankong, the vacancy dropped to 0.3% implying a near full occupancies. The reason is because the area had several new industrial buildings erected in the past several years, which has drawn attentions from corporate tenants in the finance and high-tech industries. However, the overall vacancy decreased 0.1 pps to 4.9% on the semi-annual basis. An increase was seen in the average rent due to building owners with increasing occupancies increased rents pushing the level upwards by 7.9% to NTD 1,416 per ping per month.


 Future Trends

Under the current economic recovery, business sentiments have remained cautious and observant on costs and payroll expansions. The latest Manpower Employment Outlook Survey indicated that there were 27% of companies in Taiwan intended to recruit additional employees. However, the percentage was down by 7% q-o-q or 25% y-o-y. Therefore, we saw several lease surrendering and reduction this quarter. Additionally, most new leases were committed on small units implying most corporate tenants would like to start with small units first and slowly expand when businesses perform well.  

The government has forecasted the majority of domestic investments made within Taiwan would centre on Internet of Things, semi-conductors and Intelligent E-management applications/systems. Thus, the leasing demands are likely to continue coming from high-tech/IT, and the finance industries.

Furthermore, the annual tourist arrivals in 2015 reached 10 million, a growth of 5% y-o-y. The number of Taiwanese citizens travelling abroad also increased 11% reaching 13 million counts. Thus, the prospering tourism in Taiwan has also attracted various businesses in the aviation, retail, and travel agencies to establish operations here, and in turn, the growth generated demands of office spaces. We have already received enquiries from several retailors on space expansion possibilities.

Since the supplies planned for 2016 are rather limited, the existing stock would continue being absorbed. There have been two projects planned to be completed this year providing approximately 37,000 pings of floor spaces with 77% of which committed by the owner. It is projected that for tenants who can afford higher rents, they would continue enquiring spaces in the Xinyi submarket. Small-to-mid MNCs and domestic firms are likely to seek spaces in other submarkets or New Taipei City.

In terms of the rental growth, the outcome would be somehow mixed. Due to limited new supplies entering the market and newer buildings may tend to pose higher rents, it is likely to boost the rental growth. On the other hand, for buildings lost tenants over to newer or better buildings, landlords would face pressure on digesting these vacancies. Thus, they may tend to be more lenient on rental negotiations by giving better deals. Therefore, the cross-effect is likely to render the overall rental growth moderate. The annual growth is likely to be around 2-3% at 2016 year end. 

Performance by Sub-market

  • ​The majority of take-up still concentrated in the Xinyi submarket with MNCs leasing mid-to-large sized units. Several corporate tenants relocated from other grade A buildings in other submarkets here this quarter pushing the area's vacancy to drop 1.0 pps q-o-q to 11.6% with the quarterly take-up to reach 2,641 pings, the highest among all four submarkets. The new leases signed this quarter were mainly congregated in higher quality buildings with higher achievable rents. Thus, it pushed the rental growth significantly by 1.9% q-o-q or 2.8% y-o-y to NTD 3,100 per ping per month. The largest quarterly increase in two years.
  • The cross effect of surrendering and take-up rendered the quarterly take-up to reach -1,054 pings in Dunhua North. The vacancy rate increased 1.2 pps q-o-q to 7.7%. Building owners with increasing occupancy raised rents pushing the overall rental level to surge by 1.5% q-o-q to NTD 2,361 per ping per month.   
  • Several landlords released previously reserved spaces pushing the vacancy in Dunhua South to increase by 1.6 pps q-o-q to 6.2%. The quarterly take-up decreased to over -1,900 pings. Since leasing activities tended to be quiet and vacancy also increased, building owners were more cautious on rental adjustment. The area's quarterly rent remained flat q-o-q at NTD 2,479 per ping per month.
  • The demands were mostly from small-to-mid scaled MNCs leasing small units. Several tenants relocated to Xinyi or other areas rendered the area's vacancy to drop merely 0.4 pps q-o-q to 14.1%. However, the net absorption improved from a negative value to 659 pings this quarter. The rental growth was driven by new buildings posed higher rents and building owners with lower vacancies. The quarterly rental growth rate was 0.3% with an amount reaching NTD 2,030 per ping per month.  

Table I – Taipei Office Market Key Indicators

 Gross Achievable Rent (NTD/ping/month)





Vacancy Rate




Dunhua North2,3611.5%2.2%7.7%1.2%-1,054
Dunhua South2,4790.0%-0.2%6.2%1.6%-1,964
Non-Core CBD2,0300.3%0.9%14.1%-0.4%659

Brian Liu (Associate Director) made the following comments:

Global leasing volume performed significantly well despite the present economic slowdown, the volume continued to increase by 8% y-o-y. Among all continents, Asia Pacific Regions showed the highest increase of 19% with the Europe being the second with a growth of 15%. Our latest Global Market Perspective discovered that the current corporate do not merely pay attentions on rental amounts, but also weigh greatly on amenities, transit accessibility, and building designs. They believe convenient and good working environments help companies to connect and/or to retain talented elites. It is also a common trend that CBDs that used to be occupied by financial institutions have slowly been replaced by the high-tech companies. Slowly, financial institutions have moved to new CBDs or to newer or better buildings. Leasing demand increased substantially in 2015 with China and India cities showing the largest growth. The overall rental level in the AP Region grew 3.7%. With limited supplies, it is likely to drive rents to rise further.

The trend in the Taiwan's leasing market echoed with the aforementioned trend in the AP Region. The total take-up reached more than 25,000 pings with most demands coming from the finance, high-tech, and IT industries. However, building with increasing vacancies or diminishing conditions may face pressure. It is projected the rental growth would be moderate at 2-3%.  

Investment Market

  • ​The investment volume recorded at NTD 8.9 billion by the end of 1Q16, decreased over 80% on the quarterly basis or 17% decrease y-o-y. Although the value was not the lowest in the past five years, it is still lower than the average transaction volume for the past five 1st quarters of NTD 13 billion. Investment market is often quiet in first quarters since there are several holidays i.e. New Year, Chinese New Year, 228 Memorial Holidays etc. Especially, when the government implemented a new tax regime and there was also the presidential election took place in January this year. Most investors have remained on the side lines awaiting the influences of the new tax scheme and the new government to settle. However, the Central bank and major mortgage loaners lowered the interest rate, it is likely to boost investment sentiment in general this year. 
  • The transactions this quarter involved mostly with offices, industrial properties, retail, and hotels. Although there was only one deal took place in the office sector, it occupied the largest percentage (55%) in total transaction due to the sale was an en-block building located in one of the major CBDs in Taipei. The deal pushed the unit price to reach NTD 1.8 million per ping (USD 17,000 per sqm). The second largest transaction type was industrial properties (32%). Most purchasers were in the high-tech, IT, and bio-tech industries this quarter. Additionally, due to the prospering tourism, there was an investment deal involved with a hotel resort occupied about 10% of the total transaction volume. The retail transaction took place in Taipei west end totalled at NTD0.3 billion making the unit price to reach NTD 7.3 million, a record high for the City.
  • The total land transactions totalled NTD 8.5 billion, an amount almost matched with the direct property investment. There were two domestic insurers involved in two of the deals. One participated in a leasehold project involving government-owned land planning to develop a retail facility in the centre of Taipei City. Another insurer purchased a parcel in Taoyuan and planned to lease to a foreign hypermarket operator for retail purpose.
  • In the past, insurers mostly were involved in direct property acquisitions, while presently, they actively seek investment opportunities in alternative methods or property sectors. The latest financial statement published by the top 10 insurers showing the available funds for real estate investments reached NTD 4,000 billion. Due to the minimum yield requirement posed by the Central government directly on insurers and high property prices in major CBDs, many have diverted attentions to leasehold, public infrastructure projects, or foreign properties.

Tony Chao (Managing Director) made the following comments:

In terms of the domestic market, the volume rebound in 4Q15 with various institutional investors grasped investment opportunities with decent returns in major CBDs. As the Central government slowly alleviates the investment controls over insurers, market momentum is likely to be restored in the long run. However, uncertainties such as the economic recovery and the new government would continue rendering investors to be more cautious, thus, investment market is likely to remain moderate for 1H16. As for the annual outlook, the government and major banks has alleviated mortgage controls, lowered the policy rate, and the average mortgage interest rate; hopefully the property market could slowly rebound towards the year end.