The Grade A office market recovery is lagging behind the economic recovery, with the overall vacancy rate in the market expected to reach a record high of 20 percent by the end of the year, international real estate service provider Jones Lang LaSalle said yesterday.
The agency said that the vacancy rate in the Taipei market reached 16.8 percent in the second quarter, up 1.09 percent from the first quarter, as some enterprises located in the Xinyi (信義) district moved out to suburban areas such as Neihu (內湖) and Nangang (南港) due to cost considerations.
“The relocation of offices to the city fringe has become a recent trend. With demand for Grade A office space still fragile, we anticipate that occupation rates will continue to shrink in the second half of this year,” Sherry Wu (吳瑤華), director of investments and markets at the company, told a media briefing.
Wu said that the take-up totaled a mere 700 ping (2,310m²) in the second quarter, although it was the third consecutive quarter to record a positive take-up since the global financial crisis started.
In terms of rental rates in the Grade A office market, gross effective rents declined by 1.5 percent to NT$2,214 per ping a month in the second quarter because landlords tended to offer longer rent-free periods or lower rentals in order to secure tenants, the company said.
Wu anticipated that there will be either restrained rental growth this year or a decline in rentals as large-scale businesses prefer to rent office space for lower rents rather than focus on profits while the global economy is still uncertain.
Jones Lang LaSalle said it was optimistic about the signing of the Economic Cooperation Framework Agreement (ECFA) with China, but expects that the results will take a few years to become apparent in the local Grade A office market, rather than see a rapid growth spurt.
“If we take Hong Kong’s Closer Economic Partnership Arrangement as an example, the vast demand for office space came two to three years later. Consequently, we anticipate that demand from Chinese corporations for office space [in Taipei] is limited at this stage,” Wu said.
Meanwhile, the property investment market remained warm in the second quarter as transactions totaled NT$29.84 billion (US$925.6 million). Fubon Life Insurance Co (富邦人壽) was the most active player and purchased a total of NT$6.91 billion worth of real estate, Jones Lang LaSalle said.
Wu said that although the market would remain sticky in the second half of this year, the investment market would grow as “foreign investors have become confident in Taiwan’s retail market due to the signing of the ECFA.”
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