Sat, May 06, 2006 - Page 12 News List

Office-space market looking brighter on declining vacancies

By Jessie Ho  /  STAFF REPORTER

Supported by the improving economy, the office space market in Taipei City improved slightly during the first quarter, with rents up from last quarter and vacancy rates declining, according to the latest report from Repro International Inc.

The average rental price for the first quarter of the year increased by 0.3 percent to NT$1,868 per ping (US$17.88 per m2), according to the real estate agent. The rental for Grade A office space was unchanged from last quarter's NT$2,304 per ping, and that for Grade B and Grade C offices went up by 1 percent, the report said.

The office space vacancy rate also dropped slightly by 0.89 percent to 10.7 percent during the same period, the report said.

"The market was quiet during the first quarter due to the Lunar New Year holiday period," the report said, "but demand is still strong, as many companies are looking for new offices to move into at the moment."

Xinyi District remains the most expensive with an average price of NT$2,428 per ping, followed by Dunhua South Road's NT$1,979 and Dunhua North Road's NT$1,925, according to the report.

Despite Xinyi reporting the highest vacancy rate of 27.13 percent, the area was still very appealing to multinational companies and medium and small sized local companies, it said.

The vacancy figure would be less than 1 percent if large buildings such as Taipei 101 and the President Enterprise Corporation Tower were excluded from the calculations, the report said.

Another rising zone is Neihu, specifically the Neihu Industrial Park, which has seen take-up decline significantly and rents rise over the past few years, the report said.

A huge supply between 2002 and 2003 in the Neihu Industrial Park had caused a glut at the time with a vacancy rate of 20 percent, but the situation had improved following the recovery of the economy, according to the property agent.

The area, which has comparatively low rents and newer buildings, combined with the clustering effect for information technology firms, drove the vacancy rate down to under 5 percent for the first quarter, and rents also increased slightly to NT$1,229 per ping, the report said.

The Neihu District will get a further shot in the arm in 2008, when the MRT is scheduled to connect the area to metropolitan Taipei City, it said.

The real estate investment market was also positive, which can be seen from the over subscription to Taipei Fubon Bank's (台北富邦銀行) Fubon No.2 Real Estate Investment Trust (REIT) last month.

The NT$7.32 billion REITs, which manage properties including Fubon's Neihu building, a property in Minsheng East Road and one building in Bade Road, drew over three times the required subscriptions. As these buildings are all office space, the return on the REITs is expected to be 4.4 percent over the next three years, the report said.

The prospering market may also trigger a batch of purchases, as increasing numbers of middle and small-sized enterprises are tending to buy their own offices instead of renting, the report said.

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