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News Release

Jones Lang LaSalle’s 1Q11 Taipei Grade A Office Market Survey Highlights


n     In 1Q11, the economic recovery and owner-occupied space were the reasons for the significant correction seen in the vacancy rate in Taipei’s Grade A office market, which dropped by 2.60% q-o-q to 14.97%. The rental growth in Xinyi caused the overall rental rate to rise by 0.42% q-o-q to NTD 2,406 per ping per month. This quarter’s net absorption of 10,000 ping was the best performance seen since the onset of the global financial crisis. In addition, the positive economic outlook led domestic corporations to increase their investment nationwide, triggering demand for office space.    

n     In 2010, due to cost considerations, some MNCs in Xinyi relocated to science parks or returned part of their space, resulting in the rapid growth of the vacancy rate by nearly 25%. The positive turnaround of the Taiwan economy resulted in dramatic absorption by owner-occupiers and expansion in Xinyi. In 1Q11, the vacancy rate dropped by 2.96% q-o-q to 21.87%. However, rental growth was still restrained by the high vacancy rate of more than 20%. As a consequence, rental rates increased only marginally by 0.56% q-o-q to NTD 2,714 per ping per month.   

n     In 1Q11 in Dunhua North, the move-in and move-out situation was even, which resulted in a marginal drop in the vacancy rate of 0.34% q-o-q to 12.32%. Landlords remain conservative about rental rates in order to retain current tenants and attract new ones. As a result, the rental rate remained the same as in the previous quarter at NTD 2,305 per ping per month.

n     Dunhua South hit a single-digit vacancy rate of 7.27% due to the withdrawal of Chunghuwa Telecom Tower, which was being negotiated for by a potential hotel occupier. However, the low vacancy rate in the sub-markets did not underpin rental growth. Like its neighbouring sub-market, Dunhua North, landlords aggressively secured tenants to prevent them from moving out of the space to newly completed buildings in either Xinyi or Neihu. Compared to the previous quarter, rental rates fell by 0.26% q-o-q to NTD 2,364 per ping per month in 1Q11.

n     The Non-Core CBD witnessed a huge take-up of owner-occupied space and opportunistic demand in 1Q11. Compared to other sub-markets, the Non-Core CBD saw little chance of increasing rents. Therefore, landlords took up their own space or offered referral rental packages, causing opportunistic demand. The rental rate dropped by 0.41% q-o-q to NTD 1,908 per ping per month in 1Q11.


Summary of the 1Q11 Rent and Vacancy Values for the Grade A Office Market:



Gross Achievable Rent (Grade A) (NTD/ping/month)

Change over 4Q10


Vacancy Rate

(Grade A)


Change over 4Q10







Dunhua North





Dunhua South





Non-Core CBD





Average for Taipei





























n     Taiwan ranked third in the Asia Pacific region in terms of GDP growth, with a figure of 10.8% in 2010. Domestic corporations sensed the economic turnaround ahead of MNCs, increasing their investment. In the meantime, demand for office space also increased. As a result, in 1Q11, owner-occupied space accounted for 53% of total take-up. We anticipate that, in line with domestic corporations, MNCs will increase their investment in the Taiwan market.

n     The China Bank Regulatory Commission (CBRC) permitted Chinese financial institutions to set up representative offices in Taiwan last year, following which four of them have done so. The first representative office, that of the Bank of China, will establish its first branch in the Xinyi planned district and we expect the other three banks to follow suit. The small 50-60-ping representative offices will be expanded into branches covering 200-300 ping.

n     The Neihu Technology Park (NHTP) benefitted from the financial crisis by offering rents that are half those in the Taipei CBD. Thanks to the good accessibility via the MRT, the Xihu section of the NHTP enjoyed the lowest, single-digit vacancy rate. Rental rates were underpinned by the vacancy rate and increased to NTD 1,280 per ping per month. New supply in the pipeline includes the Seven Star Xihu Building covering 4,677 ping and the 3,400-ping Colourful International Building, adding a total of 8,077 ping in 2011. This limited supply will support rental rates in the Xihu section. By contrast, the Wende and Jiuzhong sections continue to suffer from a high vacancy rate of 20%, indicating that rental rates are unlikely to rise any time soon. Overall rental rates will increase due to the rental growth in the Xihu section.

n     Due to Japan’s unfavourable currency rate, ageing population and deflation, some MNCs decided to adjust their business plans in Asia by cutting their Japan sector. Moreover, the impact of the 3-11 earthquake will worsen the Japanese deficit, causing problems for future economic growth. Taiwan might become an alternative location for MNCs thanks to its outstanding economic development in 2010. Moreover, the historical trade agreement between Taiwan and China, the ECFA, will boost Taiwan’s economy, making it one of the investment targets in the region. We are of the opinion that, together with the entry or expansion of MNCs, the Taipei Grade A office market is expected to be promising.  


Investment market:


n     Some Asian countries, such as Singapore and Hong Kong, have implemented new duties to ease the overheating property market caused by excess fund liquidity in 2010. The Seller Stamp Duty in Singapore and the Special Stamp Duty in Hong Kong apply only to residential sales. In Taiwan, the proposed new duty expected in July, the Special Goods and Sales Duty, will apply to sales of residential property not for self use and is much higher than in other countries. 

n     We anticipate that the implementation of this new duty will cause foreign investors to return to the sidelines in the first half of 2011. We may see some small price correction for prime locations and a 10-20% correction for land. Moreover, falling demand will see prices rise to reasonable levels. For long-term investment purposes, insurers will see more opportunities than other investors.  

n     In each quarter in 2010, we have seen many insurers purchasing industrial office buildings in the NHTP as they are en bloc and newly built. However, we believe that the Financial Supervisory Committee’s announcement that property investment by insurers must achieve a certain level, namely the Taiwan Post Office’s two-year deposit interest rate plus 0.5%, will cause transactions to fall. In the NHTP, the Xihu section will probably meet the new regulation thanks to its good levels of occupancy. However, the availability of space for sale is very low. The high vacancy rates in the Wende and Jiuzhon sections made deals difficult to close, with buyers standing on the sidelines. Thus, there was only one sale in 1Q11, that of Huaku V Park, which was sold for NTD 0.9 billion.

n     The government plans to ease speculation in the property market, especially by high-net-worth individuals, and a decrease in transactions is expected. In 1Q11, the total investment in grade property transactions increased by 12.89% y-o-y to NTD 20 billion. Additionally, the continuing low investment return has caused developers or investors to rebuild property as residential space or renovate it as a business hotel in order to increase returns.

Tony Chao (Managing Director) made the following comments:


We anticipate that cross-border investors will continue to increase their presence in the Asia Pacific region. In addition, Greater China will appreciate significantly due to the 3-11 earthquake and tsunami in Japan. Foreign investors are expected to stand on sidelines in the first half of 2011 and aim at value-added development projects due to the scheduled new duty, the Special Goods and Sales Duty, and low investment returns. For example, the Taipei City Government will announce a few landmark projects to encourage cross-border funds to participate in the Taiwan property market. Moreover, with the opening of visas to free individual travellers fro m China in the second half of 2011, cross-border investors and Chinese enterprises will be more interested in developing Taiwan’s leisure and entertainment business.


Sherry Wu (National Director) made the following comments:

Taiwan’s Central Bank raised its benchmark discount rate by 12.5 basis points to 1.75%, the fourth increase since June 2010. Excess liquidity and the low interest rate pushed up already overheating property prices. The Central Bank will try to normalise the interest rate to ease rising inflation and remove speculation in opportunistic markets.  Furthermore, scheduled to become effective in July, the Special Goods and Sales Duty is expected to affect the property market, although it will have less of an effect on owner-occupier buyers.

Jones Lang LaSalle Taiwan successfully helped four Chinese financial institutions to set up representative offices and branches in Taipei city. We foresee that, in 2011, the type of Chinese occupiers’ entering Taiwan will be national Chinese corporations. Private Chinese corporations will not set up office here until there is real demand and will lag behind national corporations.  

The decentralisation of MNCs seen over the past two years has caused the availability of good office locations in the city’s fringe areas to fall. Thus far this year, office space in the city’s fringe areas that meets MNCs’ demands has become limited and rental rates have risen. In addition, there is less cost saving when the high fit-out and move-out fees are taken into consideration. Therefore, we believe that the scale of relocations will be cut by half to around 5,000 ping this year. The overall vacancy rate in Taipei’s Grade A office market is expected to drop to 13-14% levels. This remains a tenants’ market and landlords are still willing to offer favourable rental packages, making now the right time to negotiate lease conditions.