Surge in demand for high-quality space as new market options emerge

• The office market experienced an upswing in Q2 2024, with lease volume reaching 10,517 gross pings, marking a 53% increase from Q1 and a remarkable 240% year-over-year growth. The first half of 2024 saw a total volume of 17,412 gross pings, nearly equivalent to the entire 2023 total of 17,694 gross pings.
• Notably, properties aged 0-1 year constituted 45% of the CBD’s leasing volume in Q2, while pre-lease deals accounted for 27%. This trend was exemplified by ChinShan N9, which is set for completion in 2025 and was fully leased by its anchor tenant. These figures underscore a growing demand for high-quality office spaces.

Market adapts to new supply; vacancy rates experience a short-term increase

• CBD absorption rose to 5,702 pings from 1,739 pings in Q1 2024. However, the release of 12,950 pings from Huang Hsiang Taipei Main Station building elevated overall vacancy to 7.3%.
• With recent completions being taken up by tenants seeking newer and contiguous floor areas, the vacancy rate is expected to drop further.

Rent growth eases as vacancy rises for the second consecutive quarter

• Although transaction volume and absorption momentum strengthened, rent growth remained flat in Q2 2024. The quarterly growth rate slowed from 1.1% in Q1 2024 to 0.1% in Q2. This deceleration was also observed across various submarkets.
• Despite Taipei CBD experiencing significant transaction volumes, rising vacancy rates, increased tenant options and tighter corporate budgets limited rent growth, highlighting the complexities of the city’s evolving real estate market.

Outlook: Shifting dynamics in supply and demand add flexibility to lease negotiations

• Increased tenant options and rising vacancy rates have given tenants more leverage in negotiations. With a stronger focus on budget control, these shifts in supply and demand dynamics have added flexibility to lease negotiations.
• Demand is expected to remain steady as new supply is absorbed. However, the anticipated peak in new completions between 2026 and 2027 is likely to delay some relocation plans and limit rent growth.