Upscale office rents in Taiwan might increase 3 to 5 percent this year, driven by a supply shortage and sustained demand from companies in the technology, financial and biological medicine sectors, the local branch of international consultancy Jones Lang LaSalle (JLL) said yesterday.
JLL Taiwan, which commands a 60 percent share of the local leasing market, published the estimate after vacancy rates for grade A offices shrank to 2.1 percent in the final quarter of last year, while rents increased 1.1 percent to NT$2,806 (US$93.26) per ping (3.3m2).
The showing indicated a modest take-up rate of 5,498 ping during the October-to-December period, which the broker said resulted from a tight supply, rather than tepid demand.
For the whole of last year, office rents rose 2.9 percent on average, the fastest increase in 10 years, with steeper hikes for some buildings in popular locations, JLL senior market director Brian Liu (劉建宇) told a news conference in Taipei.
Overall take-up rate amounted to 29,692 ping, keeping vacancy rates at a record low, Liu said.
Against the backdrop, it is common for landlords to raise rents by 20 to 30 percent when renewing contracts, Liu said, adding that adjustments reach 40 percent in some cases along with shorter grace periods for renovation.
“A lack of new supply, but stable demand led landlords to become tough and stiffen leasing terms,” Liu said.
The trend might sustain this year and beyond until the market finds an equilibrium, he said.
Office rents might climb 3 to 5 percent this year, higher than a 2.8 percent increase forecast for the global market, JLL Taiwan said.
A total of 90,000 ping of new office space are set to enter the market by 2024, but a large proportion is intended for self-use by conglomerates, Liu said.
Firms would have no choice, but move to second-tier locations in Taipei’s Neihu (內湖) and Nangang (南港) districts, where construction on about 170,000 ping of office space would be completed in the next few years, JLL Taiwan said.
Domestic life insurance companies, major buyers of commercial properties prior to credit controls, last year poured NT$39.1 billion into acquiring superfices rights, which signals a recovery, JLL Taiwan managing director Tony Chao (趙正義) said.
Top 10 life insurers have NT$6.1 trillion of funds on hand for real-estate investment, but have had difficulty finding targets, he said.
The superfices rights for government-owned plots might attract more funds this year, with NT$150 billion of asking prices in the greater Taipei area alone, Chao said.
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