APPD Market Report Article

Taipei

August 26, 2022

Zac Li, Head of Research, Taiwan

3.6%

NTD 3,543

Rents
Stable

Industrial expansion continues to drive office demand

  • Net absorption recorded -1,100 in the quarter, mainly attributed to refurnished options that were rereleased to the market. Leasing demand has remained strong across the market. Most buildings are filled, resulting in tenants having limited space to relocate to, and difficulty extending their leases.
  • In spite of the temporary impact of the pandemic on the market, demand for high-quality offices continues. Technology and manufacturing sectors have performed well, and industrial expansion continued to drive office demand. Taipei’s office market was one of the most resilient in Asia amid the COVID-19 pandemic.

The vacancy rate records at 2%, a historical low

  • In the next five years until 2027, newly available supply will likely reach 100,000 ping. Considering the need to repurpose old offices and improve office spaces, there is optimism regarding the rate of consumption of new supply. The market will maintain a healthy vacancy rate of 2-4% over the next three years.
  • The upcoming supply is stable, and rents are expected to continue trending upwards until 2026. There is still limited availability of premium office space on the market, which will result in an increased premium for office rents.

Overall net rents increase by 4.5% y-o-y

  • The surge in rents can be attributed to the solid demand and limited supply. In addition, due to the vacancy rate already trending downward to the extremely low level of 2.0%, tenants’ options are limited to the pre-committed supply. As a result in late 2022, NTD 3,000 is expected to be the new average rent for Taipei’s Grade A offices, returning to an all-time high.
  • Commercial real estate transactions have become more conservative amid the pandemic. In 2Q22, investment volume reached NTD 10.8 billion, a decrease of 62% compared with the same period last year, and that of 1H22 also fell by about 30% compared to the previous year.

Outlook: Rental rates unlikely to be affected by interest rate hikes

  • The daily COVID-19 cases have decreased from nearly 90,000 cases at the end of May to around 30,000 at the beginning of July. The market is expected to rebound quickly after pandemic conditions ease. Consequently, the annual CRE transaction volume is still projected to reach nearly NTD 100 billion.
  • Although global uncertainty is still high, with factors such as interest rate hikes, inflation, recession, and the pandemic, there remains a strong demand for commercial real estate in Taiwan from the domestic and foreign technology industries, as well as demand stemming from economic growth.

Note: Taipei Office refers to Taipei's overall Grade A office market.

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