Taipei's large commercial offices: investors wait and see

In the first quarter of 2014, asking prices in Taipei's commercial office market continued the upward trend from the previous quarter. Commercial real estate brokers said rents also rose slightly, and vacancy rates fell across all business districts, but the large commercial office investment market showed a wait-and-see attitude, while the small and medium-sized commercial office investment market remained warm overall.

According to the latest figures from Sinyi Realty's global asset management company, the average price per ping of offices in Taipei rose to NT$844,000, with prices continuing to climb, while the average rent held at NT$1,983 per ping, a slight increase; the office vacancy rate fell to 6.32%, a new low in recent years; office demand grew steadily, and the gross rent capitalization rate fell to 2.33%.

Ke Hung-an, general manager of the global asset management company, pointed out that commercial real estate transactions in the first quarter performed in two extremes: transactions in the large commercial office investment market totaled only NT$6.7 billion, far below the NT$24 billion in the first quarter of last year, showing that institutional investors such as life insurers still held a wait-and-see attitude.

Small and medium-sized commercial offices performed fairly well in the first quarter. Aside from the seasonal adjustment around Lunar New Year, overall transaction volume remained warm, and transaction prices consolidated at a high level. It is estimated that if no major negative news emerges in the second quarter, the market will continue to see rising volume and flat prices; and in the large commercial office investment market, with the return of owner-occupier buyers, transaction volume should shake off the sluggishness of the first quarter.

Ke Hung-an said the office vacancy rate in Taipei continued to tighten in the first quarter, with the overall vacancy rate falling markedly from 7.43% in the third quarter of last year to 6.32% in the first quarter of this year; the vacancy rate for A+ grade offices fell from 10.71% to 9.34%, for A grade offices from 6.30% to 5.07%, and for B grade offices from 5.71% to 4.97%, with all office grades showing simultaneous declines.

Looking at individual business districts, the Nanjing East Road Sections 4 and 5 business district and the Songjiang Nanjing business district, benefiting from the opening of the MRT Songshan Line at the end of this year, saw vacancy rates fall to 5.29% and 3.55% respectively; the Xinyi World Trade business district and the Dunnan business district also tightened markedly. Overall, vacancy rates tightened across all business districts, and with no new supply released in the first quarter, the vacancy rate reached a new low in recent years.