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Summary of the 4Q10 Rent and Vacancy Values
for the Grade A Office Market:
Gross Achievable Rent (Grade A) (NTD/ping/month)
Change from Last Quarter
Average for Taipei
§ Multinational investors are showing greater interests in Taiwanese property due to the newly signed ECFA. However, large-scaled commercial property development opportunities are limited in the market. The Taipei city government has proposed several prime location leaseholder request for proposals, such as two lots in Xinyi in the second quarter 2011. We anticipate that these certain regional developer will join this request for proposal.
§ Due to the positive outlook of the real estate market, some listed corporations are planning to allocate their partial of their capital in real estate by acquisition of self-use headquarter buildings. Moreover, these types of purchasers have less demand for gross investment yield than insurers because of using self-owned capital rather than investors’ funds.
§ Over 2010, the investment gross yield in Taiwan hit a historical low of 4%. As a consequence, some active Japanese vendors are seeking sales opportunities of office, retail and hotel projects in Taiwan. Our records indicate that Japanese commercial property offered an averaged 4-8% gross investment yield which is an attractive factor for cross-boarder investors. Nevertheless, Taiwanese investors are not able to obtain mortgage in Japan, and they have a lack of understanding of the market.
§ The 2010 total investment-grade property transaction saw a year-on-year 20% growth to NTD 79.40 billion surpassing the level of the Global Financial Crisis and in 2009. In the fourth quarter, transactions recorded NTD17.49 billion. Offices had the largest stake of 54%, then industrial of 26%, followed by retail of 23%. It is worth noting that high net worth individuals are growing in this market. In addition, their preferences for such investment are three to four star hotels and street front retail, ranging from NTD 20 million to 2 billion.
Sherry Wu (National Director) made the following comments:
The total take-up this year, of over 7,000 ping, turned out to be better than expected due to the fast economic recovery. In October, the unemployment rate of 4.73%hits a two-year low which helped the absorption of the Grade A office market. Global Insight forecasts a growth of 10% in GDP by the end of 2010, and another 4.5% growth in 2011. Therefore, we are optimistic about the future of the grade A leasing market.
A positive overall take-up was illustrated in the fourth quarter. Among all the four submarkets, Xinyi was the only district that recorded a negative take-up due to some decentralisation by IT companies. Dunhua North had the largest positive take-up of 1,131 due to the newer buildings in this district and the expansion of some IT companies.
Although the overall achievable rent showed an increased, the overall effective rent demonstrated a drop due to the increase of rent free period this quarter. Instead of lowering their rental rates, landlords increased their rent free period to secure more tenants.
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