Taipei Office MarketView Q4 2007 Property Investment Market Attracts Overseas Institutional Investors

CB Richard Ellis today published its "2007 Q4 Taipei Office MarketView." The quarterly report indicates that steady growth in the office sector, coupled with relatively low borrowing costs, has made Taipei market attractive to foreign investors.

Hong Kong (PRWEB) February 21, 2008 -- CB Richard Ellis today published its "2007 Q4 Taipei Office MarketView." The quarterly report indicates that steady growth in the office sector, coupled with relatively low borrowing costs, has made Taipei market attractive to foreign investors. The report also identifies urban renewal as a significant trend in 2008. Despite the eastward shift in Taipei's CBDs, the government aims to revitalize the aged communities in the west fringes of the City.

INVESTMENT MARKET
Owing to the subprime problem in the US, the number of real estate funds focusing on Asia real estate investment is expected to increase. In the fourth quarter, Taipei saw two prominent institutional investors enter the local investment market for the first time, with GE Real Estate purchasing HCG Building in the Nanjing-Songjiang Area for NT$684 million (US$21.1 million) and Citi Property Investors (CPI) purchasing Asia Plaza, located in the Neihu Technology Park, at the record-breaking price of NT$9 billion (US$277.6 million). The transactions indicate that the steady growth in the office sector, coupled with the relatively low borrowing costs, has made Taipei City attractive to overseas institutional investors.

Taipei's property investment market was active during 2007, especially in the second half of the year. While transactions over NT$5 billion (US$154.2 million) all took place in the latter half of 2007, the first four biggest deals in terms of the total price were transacted in the fourth quarter. The period witnessed CPI obtain B&Q Test Rite Building in Neihu for NT$5.5 billion (US$169.6 million) right after its notable purchase of Asia Plaza in November. In the meantime, Shin Kong Bank Minsheng Financial Building was sold at NT$7.3 billion (US$225.2 million) while Taiwan Life Insurance bought Kuo Hua Life Building for NT$5.37 billion (US$165.6 million). Looking ahead, both local and foreign investors are likely to seek investment opportunities more aggressively on the back of prospects of the March 2008 election and the continued rising market.

Note: 1 ping = 3.30579 square meter = 35.58323 square feet

NEW SUPPLY AND TAKE-UP IN PRIME AREAS

The fourth quarter saw the addition of Yuanta Core Pacific Securities Headquarters has minimal effect on Taipei's office leasing market as the 12,450-ping building was entirely reserved for self-use. Aside from the Yuanta Headquarters, there has been no new, leasable space released to the market throughout 2007. Slated to come on stream in the end of 2008, Walsin Xinyi Building is anticipated to stimulate the market for being a significant project located in the Xinyi-Jilong Area. In addition, the Walsin building is likely to drive up the rental level of Grade A office buildings in the city. The asking rent of the building has been set at NT$3,500 per ping per month and 5 floors of this 27-storey structure have been pre-committed by Citibank.

RENTAL TRENDS IN PRIME AREAS
Insufficient quality supply nudged average achievable office rents to NT$1,980 per ping per month, increased by 1% y-o-y, in the period under review. Such an increase was mainly contributed by the uptrend of Grade A office market as achievable rent for prime office buildings surged 1.8% y-o-y to NT$2,352 and rental rates for Grade B office remained nearly unchanged, compared with the same period of 2006. Across six submarkets in Taipei, Grade A properties residing in Xinyi-Jilong Area saw 3.2% y-o-y increase in achievable rentals, which reached NT$2,522 and outpaced the overall Grade A office rental growth in the fourth quarter. On the other hand, Grade B space in Zhongshan North Road topped the Grade B office buildings in the city, with rental levels arriving at NT$1,852 per ping per month.

VACANCY TRENDS IN PRIME AREAS
Overall vacancy rate continued to tighten in the fourth quarter of 2007, falling 2.2 percentage points y-o-y to a five-year low of 8.05%. The downward trend of office vacancy has mostly been driven by the flight-to-quality prevailing in Taipei market as Grade A vacancy has effectively declined to 9.5% in the period under review, reflecting a 17.5% decrease since its peak of 27% in late 2004. With respect to the Grade B buildings, vacancy rates have fallen within a narrow band ranging from 6.5% to 8% for several years. It has also become a notice that Grade B office occupiers start to consider relocating to premises in Taipei Main Station, an area that has been viewed as a non-prime district due to the eastward movement of Taiepi CBDs over the decades. Observed by CB Richard Ellis, a location which enjoys comprehensive transport networks, especially MRT system, has become the foremost concern of tenants seeking for Grade B space.

TREND IN 2008: URBAN RENEWAL
The goal of the Taipei City Government in fostering urban renewal is to balance local developments across the administrative districts. From the seven priority areas subject to the application of urban redevelopment, it is observed that the majority of these assigned areas are old communities located in the west fringes of Taipei, revealing the Government's ambitions in redeveloping the west of the City.

Throughout 2007, the Central and the City Governments had announced several policies to encourage private developers to implement urban renewal in designated areas, including relaxation in the restrictions regarding reward of floor capacity offered to implementers, release of 3,000 hectares of floor area in Taipei City, etc. While the incentives have caused great excitement among a variety of players, questions such as whether demand is sufficient enough to absorb a great quantity of new supply remain unanswered. Taipei is in need of a more comprehensive plan for promoting urban renewal so that the City can fulfill its goal--revitalizing aged communities.

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