APPD Market Report Article
TaipeiNovember 29, 2022
Zac Li, Head of Research, Taiwan
Leasing demand constrained by limited available space
- Net absorption recorded at 257 ping in the quarter, mainly attributed to refurnished options re-released to the market. Due to the rate hike, companies have to be more cautious when pricing extension plans. In addition, tenants have limited options for relocating as most buildings are already full, making it difficult to extend their leases or relocate.
- Known leasing volumes in the quarter totalled 2,019 ping, with 1,948 ping located in Xinyi. A flight-to-quality trend is evident, from recent transactions during the quarter.
Extremely low vacancy rate environment continues at 1.9%
- In the next five years until 2027, new supply delivery will likely reach 100,000 ping. Considering the need to repurpose old offices and improve office spaces, there is optimism regarding the demand for new supply. The market will likely maintain a healthy vacancy rate of 3%-5% over the next three years.
- The estimated completion of Taipei Dome in 2022 was postponed to 2023. In addition, the estimated completion of HOMAX Dunhua. S. financial building was adjusted from 2025 to 2027.
Rents remain stable in 3Q22, with a slight increase of 0.2%
- Overall gross rents reached NTD 2,958 per ping per month in 3Q22, increasing 0.2% q-o-q and 3.8% y-o-y. Rental growth has slowed slightly with insufficient market momentum.
- Capital values increased by 0.01% q-o-q and 0.03% y-o-y in 3Q22. Cap rates were flat. The quarter saw no transactions involving Grade A office buildings.
Outlook: Uncertainty in global economy to affect investment sentiment
- Affected by global market volatility and uncertainty, Taiwan’s investment market has adopted a ‘wait-and-see’ attitude in the short term. However, commercial real estate still offers stable investment prospects due to abundant domestic cash, fundamentals of high-tech industries, and the development of rail economy brought about by transportation construction.
- With the demand for high-quality real estate, builders and investors are still interested in the land around the MRT. In addition, the investment direction will likely also cover a variety of options, including commercial buildings with leases, technology headquarters, logistics centres, data centres, and other high-quality commercial real estate.