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News Release


Jones Lang LaSalle’s survey of the Taipei Grade A Office market over the fourth quarter 2009 revealed the following highlights

Jones Lang LaSalle’s survey of the Taipei Grade A Office market over the fourth quarter 2009 revealed the following highlights

  • The overall vacancy rate reversed its previous path by sliding 80 basis points to 16.1% from a revised 3Q09 figure of 16.9%. The fact that there were no completions during 4Q09 and the market saw its first quarter of positive take-up this year underpinned vacancy’s sharp turnaround. This ran counter to most pundits predictions.
  • The aforementioned positive absorption—following three successive quarters of occupiers’ returning more space than they leased—came to 4,150 ping. Despite the unexpected uptick in demand, 2009 will still go down as the Grade A office market’s worst, with an accumulative negative net absorption figure of -21,000 ping.
  • Average rental rates slid a further 2.0% to NTD 2,371 per ping per month.  The correction came on the back of declines of 4.0% for Xinyi, with the consequence being that the area’s year-on-year rental rates retracted by 7.9%.
  • Descending rental rates in Xinyi have been gained momentum from a vacancy rate which began 4Q09 comfortably above 20%, before edging down 2.1 percentage points. Most of this was achieved as tenants moved in to the recently-completed Walsin Lihwa building.
  • Compared to a year ago, Taipei’s Grade A office rents have retreated 7.9%, which is a desirable position for local landlords when juxtaposed against other office markets in Asia-Pacific.
  • It is worth noting that 2009 not only saw demand for office space considerably restrained, but it also delivered over 40,000 ping of new supply to a market that averaged 12,400 ping per annum over the preceding three years. To put this into perspective, Taipei 101—an addition that crashed the office market—is about 53,800 ping.

Summary of 2009 Q4 rent and vacancy values for the Grade A office market:

Gross Achievable Rent (Grade A) (NTD/ping/month)
Change from last Quarter
Vacancy Rate
(Grade A)
Change from last Quarter
-2.1 ppt
Dunhua North
-0.4 ppt
Dunhua South
-0.6 ppt
Non-core CBD
+1.1 ppt
Average for Taipei
-0.8 ppt


  • Unfortunately, the most compelling story when it comes to market trends is that there are few to speak of. Having said that, we do take comfort in the fact that the sky-high vacancy rate discontinued its upward trajectory in a sign that things may be beginning to stabilize. As such, although the 4,150 ping of take-up falls short of the more than 20,000 ping seen during the very best times, it is very welcome. This is particularly true since the lion’s share was in Xinyi, an area that desperately needs to bring its vacancy rate down.
  • The migration of cost-sensitive occupiers to Neihu Technology Park and other city-fringe areas has continued, as the spread between leasing costs fails to close and the fringe areas accumulate amenities and develop infrastructure. After a rather tumultuous start, the Brown MRT Line, which services Neihu and it surrounding environs, now appears to have worked out most of its kinks. A foreign IT company and a local leading travel agency are the most recent occupiers to opt for the tech-park over the CBD with the consequence being 7,000 ping worth of office space being relocated.
  • Walsin Lihwa building dominated 4Q09 absorption figures for both Xinyi and Taipei City, with our records indicating that roughly 5,000 ping of the building’s 15,000 ping became occupied over the period. It is interesting to note that a similar-sized building across the street was met with the same success two-years-ago when the Uni-President Group made a concerted effort to lease President International Tower. Consequently, it appears that newer properties in Xinyi are still in demand; including Taipei 101, which saw its vacancy trend down over 4Q09.
  • Rental rate advancements are facing some downward pressure in Xinyi as existing lease agreements come up for renewal. In 2005, following the launch of the Taipei 101 office tower, a number of landlords in the area had little choice but to slash rents to attractive occupiers. Clearly, no one anticipated a recession which would be of this scale, so they assumed they would be able to hike rents when the said contracts came up for renewal. However, many tenants are balking at an incremental hike that can be as high as 40%, with the outcome often being a compromise by both parties. Perhaps the most interesting dynamic to the trend is that these rental rates do not apply to prospective new tenants. Unlike those tenants with existing agreements, the new tenants do not have the lower rent as a benchmark, and as such, have not been conditioned to think the proposed leasing cost is exorbitant.
  • Unlike during good years, a number of occupiers are entering early renewal negotiations with landlords, with the hopes of locking in current rental rates for the next five years. This trend has been more pronounced in buildings that are approaching, or at, 100% occupancy.
  • The positive sentiment surrounding cross-Strait developments also continues to influence landlords’ reluctance to bring rental rates to a level that is more reflective of the fundamentals displayed by the Taipei office market. Intuitively, one would think that a rise in vacancy from 7% to 17% would necessitate more than 8% fall in rental rates, but that has not been the case in Taipei.

Outlook for the Taipei office market:

  • On the supply side of things, 2010 will not be as damaging to landlords as 2009 was, but there are two properties in the pipeline. Taipei Financial Center—situated at the intersection of Nanjing and Dunhua Roads—and Shin Kong’s A12 development in Xinyi will bring a combined 21,000-ping worth of Grade A space to the market. The good news for landlords is that the adverse affects of this to rental rates will be mitigated by the successful pre-leasing campaigns of both properties. A second factor that will constrain the stream of new supply from the two buildings is the amount of space that will be reserved for the owners’ own use. The net affect could see as much as 50% of the 21,000 ping not entering the lease market. On the other hand, there is a very real possibility that the additional stock, when added to a market that is undergoing emigration, will result in an overall vacancy rate approaching 20%.
  • We anticipate that movement to the city-fringe will continue over 2010 as employees’ attitudes towards commuting to these areas change and the city fringe areas continue to develop more attractive characteristics. In the past, an employee would be willing to live in the suburbs and commute to the CBD, but not vice-versa. However, this is beginning to change in response to the new MRT line and additional dining and retail alternatives to enter areas like Neihu and Nangang. Consequently, over the course of 2010 we expect another 25,000~35,000 ping worth of space will relocate to the city-fringe from the Taipei CBD.
  • Following the lead of international banks, local players will more actively search for CBD locations for their branches, which will increase competition for the very best spots. Over 2009, HSBC and Standard-Chartered were two of the more aggressive banks that were actively seeking major intersections and high foot-traffic areas to meet their expansionary plans. However, the current year will see as many as 30 branches vying for the most attractive locations; partly driven by, and partly competing with retailers’ reports of improved sales.

Sherry Wu made the following comments:

“We have been pleasantly surprised at how quickly the economy has turned around and have cautious optimism regarding the health of the office market going forward. Although we have consistently downplayed what landlords’ should expect from Mainland companies’ seeking space in Taipei, we do think that it will add weight to a recovery driven by economic growth.”

“With regard to office markets in particular, they tend to trail economic recovery by about two quarters. That said, if Taiwan’s economy began showing growth in the fourth quarter of 2009, then we should not expect a real recovery in the office market until the middle of 2010. And we shouldn’t forget that this will be slowed by a relatively large amount of supply that was added to the stock over 2009.”

“We would like to encourage our clients to consider an early renegotiation to their existing lease agreements over the next little while, as it is our opinion that now provides the best opportunity to time their lease with the economic cycle. If we know that the economy follows cycles, it is unlikely that there will be another recession in the next couple of years. So an occupier should seek to be signing an agreement now, as it stands a better chance of being in place as rental rates climb over the next few years.”