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Taiwan City Office & Residential Market in Taipei City and Investment Market In R ESEARCH TAIWAN CITY OFFICE & RESIDENTIAL MARKET IN TAIPEI CITY AND INVESTMENT MARKET IN TAIWAN Q 3 2016 COMMERCIAL OFFICE MARKET NEIHU RESIDENTIAL REAL ESTATE IN TAIPEI CITY TECHNOLOGY MARKET IN INVESTMENT PARK TAIPEI CITY KEY FINDINGS ECONOMY The Directorate General of Budget, in September that the discount rate, the Accounting and Statistics of Executive secured financing interest rate and the In Q3 2016, monitoring scores Yuan estimated that the GDP growth in short-term interest rate remained went up by 3 to 23, signaling 2016 would be 1.22% (Table 1). National unchanged at 1.375%, 1.75% and 3.625% economic recovery in Taiwan. Development Council announced that respectively. domestic economy became stable in Construction mortgage balance was down The Central Bank of Taiwan September 2016 (Table 2). This shows that by US$22 million to US$51.9 billion, down announced that the discount rate, the economy is recovering. the secured financing interest rate 1.7% year on year, representing a decline and the short-term interest rate Economic growth is lower than pre-financial for 10 consecutive months. Residential remained unchanged at 1.375%, crisis level, which means that the world mortgage balance, on the other hand, 1.75% and 3.625% respectively. economy is growing at a slow pace. In the surged US$1 billion to a record high of USA, despite its economy is gradually US$200 billion. This is mainly supported by recovering, investment sentiment remains the mortgage scheme for first time home low. In Japan, the economy remains buyers (undertaken by eight sluggish, while emerging economies see state-owned/partially state-owned banks), stable growth. Mainland China has representing 8.5% of total mortgage experienced moderate uptick, and Q3 balance. economic performance was supported 116 mainland investments in Taiwan were mainly by the service sector and approved from January to September in manufacturing sector. To stimulate 2016, up 5.45% year on year. Investment domestic growth, the Central Bank of (increased investment) went up by Taiwan ceased to lower interest rates after 112.29% to US$212 million. four consecutive quarters, and announced TABLE 1 Latest Economic Indicators Indicators 2016 2015 2014 2013 GDP Growth 1.22% 2.32% 3.74% 2.23% Unemployment 4.08% (Aug) 3.78% 3.79% 4.08% Annual Change of CPI 0.33% (Sept) 0.14% 0.60% 0.33% Construction 19.67 million Permits Issued 32.60 million 38.63 million 39.76 million (m2) (Jan-Sept) Number of 175.8K Buildings 292.6K 320.6K 371.9K Transferred (Jan-Sept) Exchange Rate $31.37(9/30) $33.07 (12/31) $31.72 (12/31) $29.95 (12/31) (US$1=) Source: DGBAS of the Executive Yuan, Construction and Planning of the Ministry of the Interior and Central Bank of the Republic of China (Taiwan) TABLE 2 Monitoring Indicators 2016Q3 2016Q2 2016Q1 2015Q4 Monitoring Scores 23 (Sept) 20 (Jun) 15 (Mar) 14 (Dec) Remarks: Scores 9-16 – sluggish; 17-22 – transitional; 23-31 – stable; 32-37 – transitional; and 38-45 – booming Source: National Development Council 2 TAIWAN REAL ESTATE MARKET REPORT Q3 2016 RESEARCH OVERALL ECONOMY FIGURE 1 Construction Mortgage Balance and Residential Mortgage Balance (2015-16) Source: Central Bank of the Republic of China (ROC), complied by Research Dept, REPro Knight Frank FIGURE 2 Number and Amount of Mainland Investment (2016) Source: Investment Commission of the MOEA, complied by Research Dept, REPro Knight Frank FIGURE 3 Number of Buildings Transferred in Taiwan (2006-16) Number of Buildings Transferred in Taiwan Source: Ministry of Interior,ROC, complied by Research Dept, REPro Knight Frank 3 COMMERCIAL REAL KEY FINDINGS ESTATE INVESTMENT Major transaction of commercial Major transaction of commercial real their headquarters. real estate amounted US$316 million in Q3 2016. estate amounted US$316 million in Q3 In terms of office transaction, BTC 2016. Transaction totaled US$1.6 acquired YC Group HQ in Neihu billion as of Q3. Districti, Taipei City for US$6 million. In Q3, tech firms and insurers were Looking ahead, transaction of active investors. The largest self-use commercial real estate will commercial land transaction was still be the trend. The Central Bank Asus’s acquisition of land parcels in reduced the gross cap rate to 2.345% Guangdu from Eastern Media so that the threshold for insurers to International for US$250 million. acquire commercial properties was Office buildings are planned to be lowered, which in turn would increase built on the 406K sqf land. Fubon the possibility for them to invest in Life’s acquisition of Tokyo HQ in properties in Taiwan. Neihu for US$130 million was the Although real estate policies have largest commercial building been relaxed, the market is still transaction in Q3. This showed that impacted by the price gap between insurers, with abundant investment the seller and the buyer. Investors are capital, continued to seek subjects expected to be rather conservative in that generate good income. With Q4. improved production capability, tech firms now looked to self-use properties – which would be used as TABLE 3 Dollar Amount of Major Commercial Real Estate Transactions (US$ billion) 2016 2015 2014 Q1 0.26 0.40 0.24 Q2 0.99 0.31 0.76 Q3 0.99 0.29 1.33 Q4 _ 2.40 0.67 Total 2.24 3.40 3.00 Source: Market Observation Post System, complied by Research Dept, REPro Knight Frank 4 TAIWAN REAL ESTATE MARKET REPORT Q3 2016 RESEARCH 商用不動產買賣Commercial Real Estate Sales Transactions For major transactions of offices in Taipei City and Neihu Technology Park, please refer to the following pages. Other major commercial real estate transactions included: TABLE 4 Major Commercial Real Estate Transactions Total Building Building Unit Value M D City District Subject Property Buyer Seller Area Value Remark (US$ (sqf) (US$ psf) million) National J-Three Taoyua 7 06 Pingzhen (Plant) Aerospace International, 41 236,151 $174 n City Fasteners S.D. Component Taipei Gref Investment 7 18 Neihu Tokyo HQ Fubon Life 130 319,718 $407 City (Taiwan) Tainan Gongsheng 8 30 Rende (Plant) IST Energy 17 24,898 $719 City Investment Kaohsi Nanzi Export LCY Chemical 9 02 ung Processing ASE Group LCY Chemical 16 176,168 $94 Nanzi R&D Center City Zone Miaoli Zhunan Jabon $78 9 21 Xuncang Tech HQ Xuncang Tech 5.66 6,461.75 County Township International Source: Market Observation Post System, complied by Research Dept, REPro Knight Frank 資料來源：公開資訊觀測站、瑞普萊坊市場研究部 土地買賣Land Sales Transactions TABLE 5 Major Land Sales Transactions Total Distric Value Land Unit Value M D City Section Buyer Seller Zoning Remarks t (US$ Area (sqf) (US$ psf) million) Subsectio Dong Guang Taipei Nanga n 3, Highwealth Type III 7 19 Steel 24.66 1,581.18 $155.96 City ng Nangang Construction Residential Machinery Secton Type I-B Sold with Taichu Xinfu Residential, 8 11 Nantun Runlong (An individual) 13.92 2,543.99 $54.72 ng City Section Type I-C construction Residential permits Subsectio Fan Jiao Shi Taipei n 4, Technology 8 12 Beitou Asus Asset 78.31 11,442.97 $68.44 City Fengnian Industrial Management Section New Yongcui Highwealth Yeashin Type II 8 26 Taipei Bancio 13.81 1,176 $117.46 Section Construction International Residential City Tainan Bailun Highwealth 8 26 Rende (An individual) 13.39 3,825.91 $35.00 Commercial City Section Construction 資料來源：公開資訊觀測站Source: Market Observation、瑞普萊坊 Post System,市場研究部 complied by Research Dept, REPro Knight Frank 5 KEY FINDINGS OFFICE MARKET IN Vacancy rate of Grade-A offices TAIPEI CITY in Taipei City averaged 9.26%, Leasing Market Investment Market representing a 0.9% decrease in a single quarter. In Q3 2016, Grade-A office rental Major sales transaction in Taipei City averaged US$27.93 psf per month, included: Xinyi District saw the best declining by 0.1%. With a vacancy August 19: BTC acquired the eighth absorption among Grade-A rate of 9.26%, Grade-A offices were floor of HQ of YC Group and parking offices in Taipei City. well-absorbed, and the vacancy rate spaces for about US$6.4 million. The dropped by about 0.9%. building area is about 14,623 sqf and Xinyi District saw the best absorption the land area is about 2,920 sqf. among Grade-A offices in Taipei City. The vacancy rate declined to 9.28%, representing a 2.94% decrease in a single quarter. With steady demand and a lack of new supply, vacancy rate of Grade-A offices continued to decrease. There will be new supply next year, which will slightly drive down the market rental and thus lure the tenants to stay in this district. In Q3, Cathay Landmark Plaza saw the most rapid absorption – Amore Pacific and Adecco Taiwan leased a total of 24,906 sqf. Takeda Pharmaceuticals Taiwan leased about 21,384 sqf in Farglory Financial Center. In Q3, rental levels of Grade-B offices averaged US$18.54 psf per month, with a vacancy rate of 4.29%, up 0.03 quarter on quarter. Small and medium enterprises favor Grade-B offices. Given that there will be a lack of new supply, vacancy rate will remain low. FIGURE 4 Map of Major Office Districts in Taipei City 6 TAIWAN REAL ESTATE MARKET REPORT Q3 2016 RESEARCH FIGURE 5 Office Rental Levels in Taipei City RENTAL LEVELS IN 元/坪/月 TAIPEI CITY NT$/ping/m (新台幣) 3,000 TABLE 6 2,500 Office Rental Levels in Taipei City, Q3 2016 2,000 Grade A Grade B 1,500 Market Rental (US$/sf/yr) 27.93 18.54 1,000 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 Net Effective Rental 39.38 23.93 GradeA級 A GradeB級 B (US$/sf/yr) Asking Rental (US$/sf/yr) 31.20 20.38 Source: Research Dept, REPro Knight Frank Vacancy Rate 9.26% 4.29% FIGURE 6 Remarks: Net effective rental takes into account rent-free periods based on the actual usable area.
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