Foreign buyers hunt for office space in Taipei

Two international buyers are looking to buy premium office buildings in Taipei next year, valued at NT$5 billion to NT$6 billion each, an executive at CB Richard Ellis Taiwan Ltd (世邦魏理仕) said yesterday.

"Two of our clients have expressed a firm interest in buying Grade A office buildings in Taipei," said Andrew Liu (劉學龍), general manager of the property broker. "One is looking for 10,000 ping of office space and the other wants 15,000 ping."

Due to confidentiality agreements signed with its clients, CB Richard Ellis was unable to disclose the identities of the prospective buyers, but he did provide some information.

"One of them is attempting to buy an office building as its regional headquarters and the deal is expected to be finalized during the first half of 2003," he said.

Prime targets include the IBM Building located on Keelung Road, the Far Eastern Building (遠企大樓) on Tunhua South Road, the International Trade Building (國貿大樓) on Hsinyi Road, and Continental Engineering Corp's (大陸工程) newest building -- yet unnamed -- on Tunhua South Road, Liu said.

"If the deals can be cut as expected, I don't think anyone can discount their importance," especially at a time when the office market is still haunted by oversupply, Liu said.

The surplus of office space in Taipei has continued to rise further during the third quarter, with average vacancy ratio edging up to 9.17 percent in Taipei, a record high for the past six years, according to DTZ Debenham Tie Leung (戴德梁行).

Danny Shao (邵澤業), a researcher at DTZ, said office rental prices have continued to drop, suppressed by the severe competition resulting from oversupply and sagging demand.

"Last quarter, average rents dropped about 2.3 percent to NT$2,100 per ping from the previous quarter," he said.

While the domestic economy began to show signs of recovering in the second quarter, the rebound has not been as strong as earlier anticipated and potential investors are still conservative toward the Grade A office market, said Jacky Tsai (蔡孟頤), business director at Colliers Jardine Ltd (怡高物業顧問), the Taiwan branch of Colliers Jardine International.

The city's office vacancy rate is likely to continue to rise, albeit at a slower pace.

"Overall the average ratio was at around 11 percent in the third quarter and is expected to edge up to 12 percent in the fourth quarter," Tsai said. "Inquiries by potential buyers are always out there but any large-scale business deal -- be it buying or leasing -- is unlikely to happen over the next three years."

Office rental yields still remain low compared to markets elsewhere in the region, he said.

According to Colliers Jardine, the average yield for this year would stay at around 6 percent in Taipei, compared with 14 percent to 17 percent for cities such as Beijing and Shanghai.

But another international real-estate firm, Jones Lang LaSalle, said they remain confident that the domestic office market will pick up, despite the surplus in vacant office space.

"There are always changes in the market, good or bad," said Calvin Wang (王治平), managing director of Jones Lang LaSalle Taiwan (仲量聯行). "Direct-links between Taiwan and China, if followed through, would have some positive impact on the office market."

Though the office vacancy rate is high, there's a lack of Grade A office space in Taipei, Wang said.