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News Release

Jones Lang LaSalle’s 2Q10 Taipei Grade A Office Market Survey Highlights

Taipei, 6 July 2010

§        More transactions were seen in this quarter, and most of these were from renewals and some new leasing cases in the Xinyi and Dunhua South sub-markets. The new supply came from the rebuilt Taipei Financial Center, which was damaged during the 921 earthquake in 1999. We expect that certain floors of this strata-titled property will be taken up for self-use purposes. Some enterprises located in the Xinyi and the Non-Core CBD are moving to the city fringe due to cost considerations, resulting in the overall vacancy rate to reach 16.08%—an increase of 1.09%.


§        The economic indicators have improved further, and this is the third consecutive quarter to record a positive take-up since the onset of the global financial crisis. Nonetheless, the take-up this quarter totalled a mere 700 ping (2,313.5 sqm). Furthermore, our research indicates that the relocation of back offices to the city fringe has become a recent trend. And with the still fragile demand for Grade A office space, we anticipate that take-up will continue to shrink in the second half of 2010.


§        The achievable rents had a 0.5% growth to reach NTD 2,379 per ping per month (USD 22.42 per sqm per month).  However, if we translate this figure to gross effective rents, the rents declined by –1.5% to NTD 2,214 per ping per month (USD 20.86 per sqm per month). The difference came from the fact that landlords are likely to offer longer rent-free periods to secure tenants. Overall, the Grade A office market recovery is lagging behind the economic recovery.


§        Xinyi had a negative absorption of approximately –500 ping. This resulted in the vacancy rate to reach 19.70%, or an increase of 0.22%. Meanwhile, rents increased by 1.94% to NTD 2,672 per ping per month (USD 25.18 per sqm per month). The rise was not due to an increasing demand for Grade A offices, but due to the addition of a new property that commands higher rental.


§        In Dunhua North, some tenants expanded their space this quarter. Meanwhile, with the completion of Taipei Financial Center, the vacancy rate climbed to a record high of 16.80%, the second highest after Xinyi. Furthermore, rents slid by a further 2.0% to NTD 2,208 per ping per month (USD 20.81 per sqm per month) —an indication that landlords were eager to secure tenants in the period by offering lower rents in case tenants would like to move out to Neihu. The vacancy rate in the Non-Core CBD increased by a further 7 basis points to 13.16% due to the lack of new transactions.


§        Compared with other sub-markets, Dunhua South saw more activities due to the positive take-up of IT firms and financial institutions. Rents continued to grow by 0.97% to NTD 2,378 per ping per month (USD 22.41 per sqm per month). Take-up in Dunhua South reached 1,817 ping (6,005.2 sqm), helping the vacancy rate to decline to 12.03%—the lowest sub-market vacancy rate.


Summary of the 2Q10 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







Dunhua North





Dunhua South





Non-Core CBD





Average for Taipei








§        In 1Q10, GDP growth reached 13.0%; however, demand for Grade A office space lagged behind. In the aftermath of the global financial crisis, most enterprises had revised their rental costs. As a consequence, the relocation of many companies' back offices to the city fringes – either in Nankang or in Neihu – has become a new trend, while front offices were maintained in the CBD for visitors. This situation was not only true for domestic companies, but also among international firms.


§        Enterprises remain hesitant about the global economy, and cost considerations are still on going. Hence, landlords are eager to secure tenants by offering either longer rent-free periods or lower rentals to avoid vacant space. In light of this, we anticipate that there will either be a restrained rental growth this year or a decline in rentals.


§        The Taipei City government implemented a relaxation of the regulations on land use to cope with our changing industries. According to the regulation, the creative industry, IT and consultancy business services are now allowed to register in industry land. According to our research, Dongxing Street in Songsang, Beishihu in Neihu and Nankang industry land will benefit from this adjusted policy, which would help attract more companies to locate in these areas.


§        The newly signed Economic Cooperation Framework Agreement (ECFA) with China opens the Taiwanese market to financial business with the Mainland. Our research indicates that 28 Chinese corporations have set up offices in Taiwan thus far. If we take the Hong Kong Closer Economic Partnership Arrangement (CEPA) as an example, the vast demand for office space will come in two to three years. Consequently, we anticipate that the demand from Chinese corporations for office space is reserved at this stage.


§        Central Bank of China, Taiwan (CBC) announced that the quantitative easing policy has been removed and that the GDP growth reached a record high of 13.27%. Although the CPI growth remained soft, CBC increased the rediscount rate to 1.375% to control the housing mortgage in certain Taipei sub-markets, with a view of getting rid of inspection on real estate.



Investment market:


§        The investment market remained warm in the second quarter as transaction totalled NTD 29.84 billion (USD 929.60 million). Fubon Life was the most active player and purchased a total of NTD 6.91 billion (USD 251.26 million) properties.


§        Foreign investors have become confident in Taiwan’s retail market due to the signing of the ECFA. In addition, our research indicates that the initial yield of retail outlets hovers around 4–5%. Foreign investors could help boost the incomes of retail outlets with their retail expertise as they have the experience of running retail centres across different countries. In the meantime, they are willing to lend a hand to domestic enterprises and land owners by developing residential projects and large-scale leisure complexes through joint ventures.


§        Real estate developers have been resorting to purchasing old commercial buildings, tear the structures down and then rebuild the properties into residential condominiums due to the difficulties in acquiring prime residential land in Taipei City. For example, Cathay United Bank auctioned the 40-year-old Sankwang Weida building for NTD 1.5 billion (USD 46.73 million). After which, the winning bidder will reconstruct this commercial property into a residential project.



Sherry Wu made the following comments:


The global economy is still full of uncertainties such as the European sovereign crisis and the US fragile economic recovery. Large-scale enterprises are still conservative about their rental cost. Therefore, they are likely to rent the current office and expect lower rents before making profits while the global economy is still uncertain. Moreover, this will prolong the average rental term and lead to a decrease in rents.


The demand for prime office has been recovering in mature markets, such as Singapore and Hong Kong in Asia. We anticipate that the recovery of Taipei's Grade A office market will come in 2011 as Taipei lags behind other Asian cities.


We are optimistic about the signing of the ECFA between Taiwan and China. We foresee that the agreement would directly benefit different industries such as trade, manufacture, textile and petroleum chemical. Furthermore, 11 other service business sectors, such as accounting, meeting, hospital, insurance, banking and securities, will generate demand for office, industrial and land. Most importantly, ECFA will enable Taiwan to face new challenges and lead Taiwan’s economy and property market to another level.


Chinese tourists are free to travel in Taipei in groups, and this has helped the Taiwanese hotel and retail sectors to grow their business. We anticipate that a further relaxation on the free and independent travel (FIT) regulations will be implemented soon, and this will be of great importance to our economy. When it comes to the Grade A office market, we cautiously expect that the results will take one to two years to become apparent, instead of witnessing a rapid growth. As a consequence, the market will remain sticky in the second half of 2010. However, the investment market will grow due to the anticipation of increasing demand.