Leasing momentum continues with office upgrades and a variety of industry demand sources

• Office upgrades propelled leasing, highlighted by a significant transaction of approximately 5,000 ping at the Fubon A25 Building, where Dentsu relocated within the Xinyi submarket. Additionally, the Yunta Gold Star Building secured an 856 ping lease with a tech firm.
• No sector exceeded 20% of the total deal counts in 2024, indicating broader demand distribution and enhanced risk mitigation.

Cost-cutting leads to an increase in Xinyi vacancy, while the broader CBD remains balanced

• Xinyi experienced significant negative net absorption as tenants downsized or relocated to reduce costs in Q4, highlighting rental pressures. This was partially offset by positive absorption in the Others of the broader CBD spectrum, which offered more competitive rents.
• Driven by these dynamics, Xinyi’s vacancy rose by 0.8% q-o-q, while Others saw a 0.8% decline. Dunhua South and North remained stable, with minimal decreases of 0-0.2%. As a result, the overall CBD vacancy rate edged up slightly by 0.1% to 7.0%.

The Taipei CBD office market enters an adjustment phase as rent growth slows

• The net effective rent in the CBD slightly increased by 0.2% q-o-q in Q4 2024, with an annual growth rate of 1.2%, showing a slowdown compared to the growth of the previous three years.
• As the market adjusts to higher vacancy rates, it is transitioning from a phase of rental increases to gradual rent adjustments.

Outlook: Absorption challenges loom with rising competition and rental rate moderation

• Approximately 40% of new leasing supply in 2024 has been absorbed, leaving around 17,000 pings still in inventory. An additional 36,000 ping of Grade A office for lease will enter the market in 2025, posing absorption challenges.
• High construction costs for new supply have kept rental rates elevated. However, intensifying market competition and an uncertain global economic outlook are expected to moderate the rent growth trajectory.