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News Release


JLL 2Q2016 Taipei Grade A office review

Uncertain economic prospect rendered lessees and investors remained observant

Quarterly Trend

Global political, economic, and financial uncertainties have casted shadows over demands, both on the global and local level. For the trade-reliant economy of Taiwan, diminishing demands have affected the Nation's economic growth and business sentiments in general. Corporate tenants are more cautious and conservative in terms of operating spending and making leasing/relocation decisions. Therefore, most corporate lessees and investors have remained on the sidelines waiting for various conditions to clear up.

The demand for Taipei Grade A office market increased compared to 1Q16. The net take-up increased from 282 pings to 5,394 pings this quarter. The demands were mainly from existing grade A lessees relocated to premium or better office spaces. Leases signed this quarter were most corporations in the finance, high-tech, IT, and On-line gaming industries. The cross effect of new demands and landlords releasing spaces pushed the vacancy to drop moderately by 0.8 pps to 9.8%.

The average rent increased slightly due to building owners with decreasing vacancies increased rents and new buildings posed higher achievable rents. The overall rent edged up from NTD 2,641 to NTD 2,649 per ping per month.

Jones Lang LaSalle market survey also discovered that several former grade A corporate tenants relocated to grade B offices in major CBDs driving the overall vacancy to decrease by 0.4 pps to 4.44%. The building owners were cautious on adjusting building rents, thus, the overall grade B rent decreased 0.4% to NTD 1,759 per ping per month.

Future Trends

According to the latest Manpower Employment Outlook Survey for Taiwan, 27% of the corporations have still been seeking payroll expansion, 5% expects to reduce, and 66% of which would remain unchanged. This outlook has been the most negative one after the global financial crisis in 2009. For the recent five quarters, we have discovered that many corporate tenants have started to reduce or surrender leased spaces. Some have relocated to offices with lower grades or to city fringes to reduce operation costs.  This quarter we saw renowned MNC committed to a new lease and relocated to a better building but smaller units. It is projected that Taipei's leasing market is likely to remain stable with the major demands coming from existing corporate tenants intend to relocate.

The official report indicated that due to major telecommunication and computer manufacturers have planned to launch new products in 2H16, the demands is likely to encourage business to invest as well as to strengthen consumption in the near future. Additionally, the tourist arrivals have reached 4.6 million, a 10.2% growth y-o-y. Although the Chinese tourist arrival dropped significantly in May, the total number still increased 6% y-o-y reaching 1.8 million. Therefore, we have projected that the demand for office spaces would still centre around the finance, high-tech, and IT industries. If the tourism continues to thriving, it would also bring growth momentum to retail and tourism-related businesses, and in turn, boost the office demands.

There have been around 36,000 pings of new supplies planned to enter the office pipeline this year, while approximately 80% of which is planned for owner occupancy. In addition, the new building planned for completion for 2017 has started performing pre-lease this quarter. Thus, under the current limited supplies, for corporate tenants who could afford relative higher rents would continue seeking spaces available in the Xinyi submarket. Small-to-mid scaled MNCs and local corporations are likely to focus on offices in the other submarkets or city fringes.

In regards to rental performance, we have seen new leases signed in new building in the Non-Core CBD surpassed the area's level driving the average upwards. With limited supplies in the near future and landlords with decreasing vacancies tend to continue raising rents, the rental growth is expected to be around 2-3% at the yearend. trend

​Performance by Sub-market

    • The majority of take-up still concentrated in the Xinyi submarket with MNCs leasing mid-to-large sized units. Most tenants committed to new leases were in the finance, high-tech and professional service industries. Several corporate tenants relocated from other grade A buildings to premium buildings here this quarter driving the area's vacancy to drop 0.8 pps q-o-q to 10.8% with the quarterly take-up to reach 2,101 pings. The new leases signed this quarter were mainly concentrated in higher quality buildings with higher achievable rents. Thus, it pushed the rental growth by 0.5% q-o-q to NTD 3,117 per ping per month.
    • Due to domestic bank took up large spaces and owner occupancies, the take-up in Dunhua North reached 1,974 pings rendering the vacancy to drop by 2.2 pps q-o-q to 5.5%. The lowest vacancy among all four submarkets this quarter and the highest take-up since 2011. Due to mostly owners' self-demands and leases with large spaces tend to obtain better prices, the overall rental slightly edged down by 0.4% q-o-q to NTD 2,352 per ping per month.   
    • Dunhua South continued to be relatively slow. The cross effect of small-unit leases and tenants relocated to Xinyi released several units, the area's vacancy remained flat q-o-q to 6.2%. The quarterly take-up was -35 pings. Due to slow leasing activities, building owners were more cautious on rental adjustment. The area's quarterly rent edged downwards by 0.1% q-o-q to NTD 2,476 per ping per month.
    • The demands in the Non-Core CBD were mostly from small-to-mid scaled corporate tenants leasing mid-to-large sized units. The quarterly take-up reached 1,354 pings with the vacancy decreased 0.9 pps q-o-q to 13.2%. The rental growth was driven by new leasing deals closed at the price higher than the area average and building owners with lower vacancies increased rents. The quarterly rental growth reached 1.5% to NTD 2,060 per ping per month. 

       Table I – Taipei Office Market Key Indicators
 Gross Achievable Rent





Vacancy Rate




Dunhua North2,352-0.4%1.6%5.5%-2.2%1,974
Dunhua South2,476-0.1%-0.3%6.2%0.0%-35
Non-Core CBD2,0601.5%2.2%13.2%-0.9%1,354


​Brian Liu (Associate Director) made the following comments:

Although the uncertain economic prospect has rendered the global investment market volatile, the leasing market worldwide remained stable for 1Q16. Corporate tenants have been cautious on negotiating leasing terms or drafting relocation plans. We have discovered that lessees in major cities such as New York, London, Beijing, and Hong Kong taking extra time on making leasing decisions. Most demands are still concentrated on the tech and finance industries. It is also worth noting that increasing demands have started coming from the e-commerce retailors. Office supply has been healthy around the world except Europe. The amount of new supplies is projected to peak this year in the Asia pacific Region reaching more than seven million square-metres. However, building owners conduct pre-leases are likely to reduce the pressure of oversupply. The global rental performance recorded a 4.4% increase in 1Q16 showing a positive sign.

The net take-up reached 5,700 pings in 1H16, which was nearly equivalent to the level during the global financial crisis in 2010. Business sentiment has remained conservative and cautious. Lease negotiation period have also prolonged. Most demands in 2H16 are likely to continue focusing on the finance, high-tech, and IT industries. Existing corporate tenants relocate to better office spaces are also likely to bring momentum to the leasing market. However, due to limited supplies, the annual rental growth is likely to range between 2-3% by the end of 2016.

Investment Market

  • The investment volume recorded at NTD 22.4 billion by the end of 2Q16, a 1.5 times increase on the quarterly basis. The total major investment transaction volume reached NTD 31.4 billion in 1H16, the second lowest value in eight years. Under the current uncertain economic and political prospects on both the global and domestic levels, despite Taiwan's Central Bank further lowered the policy rate this month, most investors have remained observant. Additionally, the Brexit issue would further adds doubt to institutional investors on off-shore investments.
  • The largest direct property investment involved a domestic insurer purchased a commercial building in Kaohsiung City. The NTD 16.5 billion deal was made on a multiple use building which combines retail, hotel, and office uses. The vendor planned to lease back the building after selling. However, besides this deal, all other transactions amounted to merely NTD 5.9 billion with mostly corporate buyers acquire buildings for self-usages.
  • The total land transactions totalled NTD 9.4 billion. The largest deal was made by a renowned Taiwanese telecommunication manufacturer sold its land holding to private individual aiming to obtain operation funds. The second largest land transaction also involved a domestic insurer sold a vacant parcel to private individual to realise profits.
  • Several major property transactions were made by domestic insurers. The latest financial statement published by the top 10 insurers showing the available funds for real estate investments reached NTD 4,200 billion. Due to the minimum yield requirement posed by the Central government on insurers lowered and sufficient funds for them to invest, Taiwanese institutional investors are likely to continue seeking investment opportunities both in-and-outwards.

Tony Chao (Managing Director) made the following comments:

The total investment volume reached USD 133 billion globally, a decrease of 14% y-o-y. The volume has been the lowest since 2013. The main cause of which were due to various global political, economic, and monetary policy uncertainties. The three major continents performed differently. The North America was slowed for 1H16, but positive signs of recovery may imply a rebound for the real estate market. Europe has been slow and also has been forecasted anaemic prospect in the near future. Asia-Pacific Region, on the other hand, showed stability with increased transaction volumes in China, Australia, Hong Kong, while other countries within the Region remained slow.

The Taiwanese economy has been negatively impacted by the political and monetary policy effects of the world's advance economies. The weaken demands globally has affected Taiwan's trade-reliant economy rendering exports and imports continue to weaken for the fourth consecutive quarter. Therefore, the Country's Central Bank lowered the policy rate by 12.5 bps at the end of 2Q16 aiming to stimulate economic recovery. As the effects of Brexit and newly inaugurated government settle, we look forward to a rebound to the investment market in the near future.