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Good year ahead for property market

The nation's commercial property market is expected to remain buoyant this year, with a higher proportion of foreign capital injected into the market, real estate services provider Jones Lang LaSalle Taiwan said yesterday.

Taiwan saw a total of NT$63.7 billion (US$1.95 billion) worth of investment-grade property change hands last year, jumping from NT$16.5 billion in 2004, said the firm's chairman Calvin Wang (王治平) at a press conference. Last year's market was described as the most active for years.

The main contributor came from the NT$37.1 billion in real estate investment trusts (REITs) issued by Fubon Financial Holding Co (富邦金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控).

"Deals in the pipeline at present mean the momentum of 2005 will continue strongly into 2006," Wang said.

He forecast that the total transaction volume of this year's commercial properties will further expand to NT$80 billion. Foreign investors' participation will rise from last year's NT$20 billion to a projected NT$30 billion this year, with office buildings remaining their major investment target, he said.

Tony Chao (趙正義), the real estate agency's managing director, explained that foreign investors continue to show great interest in Taiwan's commercial property market because they remain positive on the cross-strait situation and have confidence that the market's asset value will climb back to the historic high it reached in 2000.

"It is clear that the capital market for investment-grade property is developing along a sustainable path," said Wang. "This should not be portrayed as a `hot' market, but rather as an orderly market that is providing funding options to developers and large financial holding companies."

In the Grade A office market, Jones Lang LaSalle expects that rents will steadily rise as the amount of new supplies is limited this year.

With the Taipei 101 skyscraper and the President International Building -- both in Taipei's bustling Xinyi district -- released to the market last year, the Grade A vacancy rate jumped to 15.4 percent in the fourth quarter, from 7.9 percent a year ago, reported Sherry Wu (吳瑤華), associate director for commercial markets.

Rents remained firm at around NT$2,200 per ping (around 3.3m2), up 2.25 percent year-on-year.

Wu said the citywide vacancy rate for Grade A properties will drop to about 12 percent by the end of the year as take-up continues this year. New supply of office space will be reduced to only around 8,300 pings this year, provided by Nan Shan Life Insurance Co's (南山人壽) financial center.

Construction for new projects scheduled to start this year and enter the market in late 2008 or early 2009 will provide more than 50,000 pings of Grade A office space.

"The leasing market is expected to be driven by contract renewal this year as most of the moving and upgrading activities have already taken place. Rents should rise by less than five percent," Wu said.
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