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News Release


JLL 3Q 2016 Taipei Grade A office review

Political and economic uncertainties rendered leasing and investment markets to moderate

Quarterly Trend

Various global political and economic uncertainties continued casting shadows over business, consumers and investor sentiments. Both external and internal demands have been weakened, in turn, adversely impacted Taiwan's imports and industrial production volumes. However, exports increased in 3Q16 for the first time this year due mainly to telecommunication and computer manufacturers launching new products in 2H16. Additionally, the number of Chinese tourist arrivals decreased 12-32% over the past two months, various tourism related businesses have been affected, there has been a domestic commercial airliner planned to terminate business and release large amount of spaces.

The demand for Taipei Grade A office market decreased compared to 2Q16. The net take-up decreased from 5,394 pings to 4,316 pings this quarter. The larger demands were mainly from retailor and landlords leasing spaces to subsidiaries. Other leases signed this quarter were mostly corporations in the telecommunication network services, high-tech, mobile gaming and retail businesses committing to small sized spaces. The cross effect of new demands and landlords releasing spaces pushed the vacancy to increase moderately by 0.2 pps to 10.0%.

The average rent decreased moderately by 0.1% due to landlords granting rental bargains to lessees leasing larger spaces. Moreover, under the current economic circumstances, landlords have been cautious on rental adjustments as increased rents may drive tenants away. Especially it has taken longer for lessees to consider and negotiate leasing terms. Therefore, the overall rent merely edged downwards from NTD 2,649 to NTD 2,647 per ping per month.

Our market survey also indicated decreasing demand and increasing rents in the city fringe areas. The overall rent of industrial office market increased 1.0% to NTD1,430 per ping/month. The main cause was landlords with increasing or high occupancies increased rents moderately. The demand in the Xihu section within Neihu submarket has remained robust and favoured by many potential corporate lessees. On the other hand, another section, Wender, has been less popular due to slightly inadequate amenities. Thus, several building owners within the area have reduced rents and raised incentives hoping to attract more tenants. The other industrial submarket Nankong is nearly fully occupied. The vacancy of which is 0.47%, therefore, a few landlords raised rents pushing the area's average rent to increase 1.9% to NTD 1,556 per ping/month. The overall vacancy of the city fringe dropped further by 0.93 pps to 3.91% this quarter signify increased demand. City fringe continued to attract corporate lessees with relatively cheaper rents and better incentives. And since the area is zoned by the city as industrial uses and building within are built to cater the needs of tech or industrial businesses, thus, many tenants in such industries have relocated to chosen to operate here.


Future Trends

According to the latest Manpower Employment Outlook Survey, the hiring intention for Taiwanese businesses of all scales are conservative in the coming quarter. Space surrendering or consolidations of operations are expected to reduce costs. Taiwanese government projected the investments made by the tech and telecommunication industries were likely to bring momentum to the Nation's economy as many new products planned to be launched in 2H16. Therefore, we project the office demands will still concentrate on High-tech, IT, mobile gaming and the financial sectors. However, new leases will be mostly committed to small-to-mid sized units. The upcoming new supplies in the next two years are likely to attract present grade A tenants to relocate.

In terms of rental performance, the overall rent has increased 2.3% compared to 4Q15. Many building owners have been cautious on rental adjustments with considerations on the current economic circumstances and business sentiment. Any major increase may drive existing tenants away. Thus, the rental growth is forecasted to be around 2-3% comparing to last year end in 4Q16.


Performance by Sub-market

  • ​Most new leases were committed in Xinyi submarket this quarter by corporate tenants in finance, tech, retail, and professional service businesses. The vacancy decreased further by 0.2 pps to 10.6% with the net absorption of 597 pings. Since most new lease this quarter were signed over small units, most landlords retained rental level. The average rent remained levelled q-o-q at NTD 3,118 per ping per month.
  • Most new leases signed this quarter in Dunhua North were of small scale. Net take-up remained moderate as several relocations took place. The area's vacancy dropped 0.4 pps q-o-q to 5.1%. Since all building owners did not adjust rents, the average rent also remained flat at NTD 2,352 per ping/month.​
  • ​After being slow for several quarters, several landlords in Dunhua South adopted new rental strategy and heighted incentives to lure tenants. Leasing activities became more active this quarter with one major corporate tenant leased large unit driving the overall vacancy to decrease by 2.6 pps to 3.2%. It has been the lowest among all four submarkets. Since tenants granted rental bargains to tenants leasing large spaces and new leases, the average rent decrease 1.1% to NTD 2,449 per ping per month.​The demands in the Non-Core CBD slowed this quarter with a net take-up dropping from 1,354 in last quarter to 94 pings in 3Q16.  One of the building owners releasing additional rental spaces initially reserved for sales pushing the area's vacancy upwards by 3.4 pps to 16.6%. As newer buildings post higher asking rents pushing the area's average rent to surge by 1.7% to NTD 2,094 per ping per month.   
  • ​The demands in the Non-Core CBD slowed this quarter with a net take-up dropping from 1,354 in last quarter to 94 pings in 3Q16.  One of the building owners releasing additional rental spaces initially reserved for sales pushing the area's vacancy upwards by 3.4 pps to 16.6%. As newer buildings post higher asking rents pushing the area's average rent to surge by 1.7% to NTD 2,094 per ping per month.   

    Table I – Taipei Office Market Key Indicators

     Gross Achievable Rent (NTD/ping/month)





    Vacancy Rate




    Dunhua North2,3520.0%1.2%5.1%-0.4%334
    Dunhua South2,449-1.1%-1.1%3.6%-2.6%3,291
    Non-Core CBD2,0941.7%4.1%16.6%3.4%94


    Brian Liu (Associate Director) made the following comments:

    Under the current global slowdown, businesses have been extremely sensitive on costs and spending. Many corporate tenants that have planned to relocate earlier have postponed their plans. Global leasing demands decreased 5% y-o-y in 1H16, while the Asia Pacific Region recorded a 4% drop in the same period. Leasing demand decreased across the Region with the exceptions of Tokyo, Hong Kong, and Manila. Considering the global leasing market performance, JLL lowered the annual leasing volume projection. The global rental growth recorded a 5.1% growth: the AP Region displayed a stable growth of 0.6%. The Taipei grade A leasing market showed a similar trend as the global market. Demands decreased while the overall rent moderated upwards. Under the present economic conditions and shortage of large amounts of supplies, rent is expected to continue increase at a slower pace.     


    Investment Market

    • The investment volume recorded at NTD 8.9 billion in 3Q16, a 60% decrease on the quarterly basis. The total major investment transaction volume reached NTD 40.3 billion in the first three quarters this year, the second lowest value in six years. Under the current uncertain economic and political prospects on both the global and domestic levels, despite domestic funds are still abundant, most investors have remained observant. However, the Brexit issue has adding pressure on the British currency. Despite the slowdown, the UK market continues receiving attentions and investment enquiries from investors. Many has considered entering the market while the currency is at a low point.

       The largest direct property investment involved a domestic insurer purchased an industrial office building in the Taipei City. All other major transactions were corporate buyers purchasing self-occupied buildings to expand operations. 
    • The total land transactions totalled NTD 28.5 billion. The largest deal was made by a domestic media corporation selling its land holding to one major Taiwanese computer manufacturer. Other land deals were mostly made by corporations buying lands to establish operations and insurers acquired lands to build hotel and student residences to realise profits.
    • Domestic insurers continued seeking investment opportunities both domestically and oversea. The latest financial statement published by the top 10 insurers showing the available funds for real estate investments reached over 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:

    Global real estate market has been influenced by various political and economic uncertainties. The global transaction volume decreased 10% y-o-y in 1H16 to USD 292 billion. JLL noticed the slowdown was caused by the US currency last year, but when the total transaction volume was calculated with respect to local currencies, many market still saw a growth in real estate investments. However, we have observed genuine moderation in investment activities worldwide. Therefore, we have lowered our projection on the global transaction volume to USD 600 billion, a decrease of 10-15%. On the domestic, the investment is likely to experience a slowdown under the influences of weakening global demands, uncertain political directions and policy effects, and slow economic recovery.