The value of Taiwan’s commercial property transactions is set to grow 10 percent annually this year, with office rental rates to increase by 5 percent, Jones Lang LaSalle forecast yesterday.
The international property consultancy attributed its rosy forecast to improving global economic indicators and the continuing robustness of market transactions.
The positive outlook stands in stark contrast to the warnings of impending market corrections that its peers issued recently.
“We expect commercial property transactions to exceed NT$100 billion (US$3.29 billion) this year, which is an increase of approximately 10 percent from the NT$90.5 billion recorded last year,” Jones Lang LaSalle Taiwan (仲量聯行) managing director Tony Chao (趙正義) told a media briefing.
Domestic life insurance companies, which were banned from making property investments for most of last year, may increase their stakes as they shift away from Taipei to New Taipei City (新北市) and other areas to meet the minimum investment yield requiremed by regulators, Chao said.
Insurers are seeking property that can generate a rental yield of at least 3 percent, higher than the 2.875 percent limit set by the Financial Supervisory Commission, he said, adding that such returns hover at about 2.5 percent in Taipei due to the steep price hikes that have occurred in recent years.
The US Federal Reserve’s planned tapering of its quantitative easing program is likely to have only a limited impact on Taiwan’s commercial property market, given that offshore funds contributed just 9 percent to the nation’s overall trading last year, Chao said.
Warming cross-strait ties are set to continue propping up the market, as more local owners look to convert old office buildings into hotel and retail spaces, and Chinese developers make plans to build vacation homes in central and southern Taiwan, he said.
As for the leasing market, Jones Lang LaSalle, which accounts for 60 percent of the local Grade-A office space market, expects rental rates to climb by 5 percent this year, after rising 3.3 percent to NT$2,471 per ping (3.3m2) last year.
Jones Lang LaSalle marketing director Joe Lin (林大喬) attributed last year’s pickup mainly to strong demand from financial services providers that are expected to continue driving the market this year.
For example, Hua Nan Financial Holding Co (華南金控) and Taiwan Cooperative Financial Holding Co (合庫金控) are poised to finish building their new headquarters in Taipei’s Xinyi District (信義) and Songshan District (松山) respectively.
About 71,000 ping of office space is to become available on the market this year, with owners predicted to take up a majority of that space, he said.
The vacancy rate in offices dropped to 10.5 percent last quarter, while the annual reading edged up 0.2 percentage points from a year earlier, Lin added.