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THE INFLUENCE OF THE TAIWAN INTERNATIONAL TRADE ENVIRONMENT ON THE TAIPEI WORLD TRADE CENTER by Angela N. Murray M.S., Social Work University of Louisville, 1977 B.A., Sociology University of Louisville, 1971 SUBMITTED TO THE DEPARTMENT OF URBAN STUDIES & PLANNING IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE DEGREE OF MASTER OF SCIENCE IN REAL ESTATE DEVELOPMENT AT THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY SEPTEMBER, 1992 (c) Angela N. Murray The author hereby grants to M.I.T. permission to reproduce and to distribute publicly copies of this document in whole or in part. Signature of the author Angela N. 1 urray Department of Urban Studies & Planning September, 1992 Certified by Lawrence S. Bacow Professor of Urban Studies Thesis Supervisor Accepted by Lawrence S. Bacow Chairman Interdepartmental Degree Program in Real Estate Development Roteh MASSACHUSETTS OF TECHNI nGYINSTITUTE SEP 02 1992 LIBRARIES THE INFLUENCE OF THE TAIWAN INTERNATIONAL TRADE ENVIRONMENT ON THE TAIPEI WORLD TRADE CENTER by Angela N. Murray Submitted to the Department of Urban Studies & Planning on July 31, 1992 in partial fulfillment of the requirements of the Degree of Master of Science in Real Estate Development at the Massachusetts Institute of Technology ABSTRACT The study of the Taipei World Trade Center on Taiwan was conducted as part of a joint analysis of five World Trade Centers. Other sites studied are those located in Amsterdam, Netherlands in Europe, Curacao, Netherlands Antilles in the Caribbean basin, Portland, Oregon and New York City in the United States. The comparisons and contrasts that were found among the five sites are analyzed in order to arrive at a series of conclusions for this study, including whether or not there are common characteristics that result in a specific set of guidelines that may be applied to the development of future World Trade Centers. A series of hypothesis were developed to arrive at a set of real estate related properties and amenities considered unique to such developments. One theory suggests that there are specific types of services offered that allow for the realization of premium rents. Specialized services include extensive trade promotion and marketing on behalf of tenants and the provision of computerized trade information and databases. Another theory, supported by the research conducted in Taipei. suggests that the international trade environment present within a particular country can encourage and promote regional economic development. This paper will analyze the Taipei World Trade Center and summarize those characteristics considered essential for a successful World Trade Center development. Thesis Supervisor: Dr. Lawrence S. Bacow Title: Professor of Urban Studies TABLE OF CONTENTS Chapter One The World Trade Center as a Real Estate Development............................Page 4 Chapter Two The Taipei World Trade Center and it's Origins.....................................Page 11 Chapter Three How the Taipei World Trade Center has Performed in it's Market.............Page 28 Chapter Four A Comparative Analysis of Five World Trade Centers............................Page 51 Chapter Five The Components of a Successful World Trade Center.............................Page 64 E xhibits......................................................................................Page 72 Bibliography................................................................................Page 81 CHAPTER ONE The World Trade Center as a Real Estate Development Project In the past, physical and political boundaries influenced the separation of economic markets. The movement of labor and capital between countries was inhibited by these boundaries. Additionally, religious and ideological differences typically influenced the segregation of economic markets. Capital, labor, and goods would move only within a country rather than among countries. Even within the United States, it was often difficult to move goods between regions separated by physical barriers and cultural distinctions. Today, the movement of goods and services takes place within a "global economy." Economic markets are no longer separated even between countries whose political and cultural differences may be vast. Instead, the trend in recent decades has been towards a closely integrated world economy. Changes in technology, telecommunications, and transportation have led to interconnected economic markets. International competition has become the norm for a wide variety of goods and services. Prices of goods in one country are commonly influenced by prices of the goods in other countries. The historical changes that have occurred over the last several decades combined with the political changes occurring in the former Soviet Union and Eastern Europe, as well as the emergence of the Pacific Rim countries as major industrialized entities, are moving us toward a higher level of international trade. Developers and owners of real estate have not been left untouched by this trend toward a globalized economy. Foreign ownership of real estate, particularly in the United States, began receiving world-wide attention in the mid-1980's. Similarly, international financial institutions provide much of the short and long term sources of debt and equity capital required for property development. Furthermore, real estate developers have found that many of their new major tenants are engaged in international trade and commerce. Many developers who have observed the internationalization of the world economy have become interested in promoting international trade within their regions. They have joined business associations whose mission is to promote international development and trade opportunities abroad. This interest has translated into the development of specialized buildings and facilities designated as World Trade Centers and designed specifically to expedite global trade. In the United States, one typically associates a World Trade Center with the massive twin towers of the New York City office structures. Certainly, in it's truest sense, a World Trade Center is a real estate project. However, it is also a marketplace where the work and services associated with international trade may be centralized in one location. The physical composition of a development project that has received an official designation as a World Trade Center from the World Trade Centers Association will be different depending on the needs of the local business community. Many successful World Trade Centers consist of exhibition halls and conference centers, import and export trade marts, Class A commercial office and retail space, and hotels. However, what distinguishes a World Trade Center in a particular market is the range of services and amenities provided that are designed to stimulate and promote international trade. Specialized services can include computerized trade information, translation and language services, educational programs, trade libraries and publications, trade missions and activities, and World Trade Center Clubs. The World Trade Centers Association stands ready to assist developers in the development and operation of a World Trade Center. The World Trade Centers Association was formed with the objective of facilitating international trade and development through the use of World Trade Centers. Specifically, the World Trade Centers Association has grown since 1968 to become a network of over 240 member organizations in 230 cities worldwide. The Association is dedicated to several basic goals: to foster increased participation in world trade; to promote international business relationships; to encourage mutual assistance and cooperation among members of the WTCA. The WTCA aspires to accomplish these objectives through the establishment of a network of World Trade Centers. As defined by the Association, a WTC is comprised of two main components: a building and its tenants, and the trade services provided by the individual WTC management. Both components must meet standards proscribed by the WTCA to allow a designation to be granted and maintained. Therefore, a successful World Trade Center is more than just a complex of exhibition halls, trade and display marts, congress or conference centers, office space and hotel rooms. A successful WTC must also offer specialized services and activities specifically devoted to enhancing international business and trade. This paper presents the findings of a study of one such World Trade Center and the economic climate of the jurisdiction of its location. Specifically, this paper tries to answer the following questions on the Taipei World Trade Center (TWTC) in Taiwan: 1. As a result of unique services available from the World Trade Centers Association, as well as specific characteristics of the facilities and amenities offered by the Taipei World Trade Center, are tenants are willing to pay a rental premium above that charged by landlords in the marketplace as a whole? 2. Is the enhancement of the rental income stream as well as additional income received from the specialized services offered sufficient to compensate the developer/owner for the additional investment necessary to operate the Taipei World Trade Center'? 3. Do tenants benefit from "agglomeration economies," that naturally occur from locating adjacent to each other in the Taipei World Trade Center'? 4. To what extent has the Taipei World Trade Center been successful in promoting regional economic development in Taipei and international trade throughout Taiwan? 5. Does the

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