Taiwan City Office & Residential Market in Taipei City and Investment Market In
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R ESEARCH TAIWAN CITY OFFICE & RESIDENTIAL MARKET IN TAIPEI CITY AND INVESTMENT MARKET IN TAIWAN Q2 2016 COMMERCIAL OFFICE MARKET NEIHU RESIDENTIAL REAL ESTATE IN TAIPEI CITY TECHNOLOGY MARKET IN INVESTMENT PARK TAIPEI CITY ECONOMY KEY FINDINGS The Directorate General of Budget, global economy, the Central Bank of Accounting and Statistics of Executive Taiwan announced that the discount Monitoring scores in Q2 2016 Yuan estimated that the GDP growth rate, the secured financing interest went up 3 points to 20, showing in 2016 would be 1.06% (Table 3). rate and the short-term interest rate an economic upturn. National Development Council were reduced by 0.125%, to 1.375%, announced that domestic economy 1.75% and 3.625% respectively, The Central Bank of Taiwan had an upturn in May 2016 (Table 2). effective from 1st July 2016. The announced that the discount limited loan for luxury residential rate, the secured financing The United Kingdom decided to leave properties remained. interest rate and the short-term the European Union after the interest rate were reduced by referendum on 23rd June, which Sixty-seven Mainland investments in 0.125%, to 1.375%, 1.75% and caused GBP to drop dramatically by Taiwan were approved from January to 3.625% respectively 。 10% in a short period. May in 2016, up 15.52% quarter on quarter. Investment (increased The US economy slowed down, investment) went up by 233.56% to Eurozone expanded mildly, Japan US$153 million. Since mainland economy started to grow, and investment in Taiwan was approved in emerging economies grew at a slower 30th June 2007, 856 applications have pace. Furthermore, China’s economy been approved, totaling US$1.6 billion. structure transformation and slow growth affected the export in Asia and the growth of global trade. Regarding the effect of Brexit on the 2 TAIWAN REAL ESTATE MARKET REPORT Q2 2016 RESEARCH ECONOMIC INDICATORS TABLE 1 Monitoring Indicators 2016Q2 2016Q1 2015Q4 2015Q3 Monitoring Scores 20 (May) 15 (Mar) 15 (Nov) 14 (Sep) Remarks: Scores 9-16 – sluggish; 17-22 – transitional; 23-31 – stable; 32-37 – transitional; and 38-45 – booming Source: National Development Council TABLE 2 Latest Economic Indicators Indicators 2016 2015 2014 2013 GDP Growth 1.06% 2.32% 3.74% 2.23% Unemployment 3.84% (May) 3.78% (Dec) 3.79% 4.08% Annual Change of CPI 1.24% (May) 0.14% (Dec) 0.60% 0.33% Construction 9.73 million Permits Issued 32.6 million 38.63 million 39.76 million (m2) (Jan-May) Exchange Rate $32.29 (6/30) $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 3 Regulations for Financial Institute of Residential Mortgage Loan and Land Mortgage Item Regulations Mortgage loans for A. LTV ratio capped at 60% high-value housing B. High-priced housing a. Taipei City: properties valued at NT$70 million and above b. New Taipei City: properties valued at NT$60 million and above c. Elsewhere in Taiwan: properties valued at NT$40 million and above Sources: Central Bank of Taiwan 3 KEY FINDINGS COMMERCIAL REAL ESTATE INVESTMENT estate investment in Q2 2016 was self-occupied properties will still be The amount of major commercial real estate transactions in Q2 2016 about US$987 million, totaled US$ the main trend in commercial real was about US$987.1 million. 1.24 billion in the first half of the year. estate market. However, the Central Bank of Taiwan further reduced Taiwan Life Insurance purchased Han interest rates, which would drive Lai New World Center in Kaohsiung down the minimum gross cap rate with a price of US$511 million, which that insurers were allowed to was the largest transaction of the purchase properties. Thus, threshold quarter. Investors in life insurance for insurers to acquire commercial industry still consistently look for and properties were lowered, which would invest in good-quality properties in increase the possibility of investment Taiwan. in domestic properties. In the office market, Yuanta Financial Although real estate policies have Holdings Building was sold for US$ been relaxed, with the effects of 93 million, which was the largest conservatism in the market and transaction of Grade-A office of the gloomy economy, it is expected that quarter. investors will adopt a wait-and-see The amount of major commercial real Looking ahead, transactions of attitude in 2016. TABLE 4 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 - 0.29 1.33 Q4 - 2.40 0.67 Total 1.25 3.40 3.00 Source: Market Observation Post System, complied by Research Dept, REPro Knight Frank 4 TAIWAN REAL ESTATE MARKET REPORT Q2 2016 RESEARCH 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 5 Major Commercial Real Estate Transactions Total Building Subject Value Unit Value M D City District Buyer Seller Area Remark Property (US$ (US$ psf) (sqf) million) Chi-Tai 4 26 Taipei Nankang Office WPG Holdings 202.85 311,597 Building 601 Presold Construction 5 5 New Taipei Hsinchu Factory Powertech EPISTAR 19.20 136,722 Building 140 Shopping mall Han Lai New 5 30 Kaohsiung Qianjin Taiwan Life Hanshin 510.99 1,695,183 413 World Center hotel 245 Uni-President 5 31 Taichung Fengyuan Retail Poya 7.96 24,298 Land 522 Property Cooperative 6 7 New Taipei Zhonghe Office Avalue Assets 10.53 48,323 Building 218 Management Source: Market Observation Post System, complied by Research Dept, REPro Knight Frank Land Sales Transactions TABLE 6 Major Land Sales Transactions Total Land Unit Value M D City District Section Buyer Seller Area Value Zoning Remarks (US$ (sqf) (US$ psf) million) Ministry of Da-Li National 4 21 Kaohsiung Qianjin Donjin 29.73 23,067 1,288 Commercial Type 4 Development Defense R.O.C Community Central Cathay Life 149,01 Business District, 5 13 Kaohsiung Renwu Chengde Individual 33.08 222 Insurance 3 Residential Type 3 & 4 Category B Ming-Zong Clevo 5 25 New Taipei Sanchong Dingkan 37.75 55,584 679 Industrial(Re- Investment Group development area) Ling Lou Kerry TJ 181,03 6 3 Taoyuan Guanyin Guangtang Industry 11.46 63 Logistics 4 Co., Ltd. Ancient Da-Li Worship 6 30 Taichung Xitun Hoan 23.38 28,293 827 Development Property- Heheji Source: Market Observation Post System, complied by Research Dept, REPro Knight Frank 5 OFFICE MARKET IN KEY FINDINGS TAIPEI CITY Vacancy rate of Grade-A offices in Leasing Market Investment Market Taipei City averaged 10.18%, representing a 0.9% decrease in a In Q2 2016, Grade-A office rental Major office transaction in Taipei City single quarter. averaged US$27.16 psf per month, included: with a vacancy rate of 10.18%. June 30: Ta Chong Bank acquired Grade-A offices were well-absorbed, As of now, Xinyi District saw the partial floors and parking spaces of and the vacancy rate dropped by best absorption among Grade-A Yuanta Financial Holding Building for about 0.9%. offices in Taipei City. US$91 million. The building area is As of now, Xinyi District saw the best about 77K pings, and the land area is absorption among Grade-A offices in about 13K pings. Taipei City. The vacancy rate declined to 12.22%, representing a 2.66% decrease in a single quarter. This year, Sony Taiwan relocated to Farglory Financial Center, Vieshow Cinema is also about to move its offices to CPC Corporation Building. In Q2, Microsoft Taiwan leased a 122K sf office at Cathay Landmark. Absorption of Grade-A offices in Xinyi District is expected to accelerate, and more tenants are expected to relocate to this district. Overall vacancy rate of Grade-B offices was about 4.26% in Q2, and the vacancy increased slightly by 0.25%, which was a normal change resulted from tenants’ relocation. FIGURE 1 Map of Major Office Districts in Taipei City Source: Research Dept, REPro Knight Fran 6 TAIWAN REAL ESTATE MARKET REPORT Q2 2016 RESEARCH FIGURE 2 Office Rental Levels in Taipei City RENTAL LEVELS IN NT$/ping/m元/坪/月 TAIPEI CITY (新台幣) 3,000 TABLE 7 2,500 Office Rental Levels in Taipei City, Q2 2016 2,000 Grade A Grade B 1,500 Market Rental (US$/sf/yr) 27.16 18.01 1,000 07Q1 07Q4 08Q3 09Q4 10Q3 11Q2 12Q3 13Q2 14Q1 15Q2 16Q1 07Q3 08Q1 08Q2 08Q4 09Q1 09Q2 09Q3 10Q1 10Q2 10Q4 11Q1 11Q3 11Q4 12Q1 12Q2 12Q4 13Q1 13Q3 13Q4 14Q2 14Q3 14Q4 15Q1 15Q3 15Q4 16Q2 07Q2 Net Effective Rental 38.30 23.25 GradeA級 A GradeB級 B (US$/sf/yr) Asking Rental (US$/sf/yr) 30.28 19.82 Vacancy Rate 10.18% 4.26% FIGURE 3 Office Vacancy Rates in Taipei City Remarks: Net effective rental takes into account rent-free periods based on the actual usable area. Source: Research Dept, REPro Knight Frank 20% TABLE 8 15% Rentals of Major Office Districts in Taipei City, Q2 2016 Change in Change in Vacancy Change in 10% Asking Rental Market Rental District Rate (US$/sf/yr) (US$/sf/yr) Market Rental Market Rental Vacancy (%) (QoQ) (YoY) Rate (QoQ) 5% Minsheng/ 20.03 25.86 0.00% 0.42% 8.75% 0% Dunhua N 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 Dunhua S 20.78 27.21 0.00% -1.39% 3.92% GradeA級 A GradeB級 B Xinyi 27.12 37.66 0.00% 1.33% 5.97% West 18.71 24.85 0.17% -0.17% 5.50% Nanjing- 17.88 22.77 0.12% 1.66% 6.48% Songjiang Nanjing- 17.91 23.13 0.00% 1.90% 4.33% Fuxing Sec 4&5, Nanjing E 14.86 19.19 0.00% 0.71% 4.27% -- Road Weighted 20.98 27.48 0.05% 0.65% 6.66% Average Source: Research Dept, REPro Knight Frank TABLE 9 Office Leasing Transactions in Taipei City Area Leased District Building Tenant (sf) Xinyi Walsin Lihua Forever Biotech 1,921 Xinyi Cathay Landmark Microsoft Taiwan 121,897 Xinyi Taipei New Horizon Hearst Magazines Taiwan 18,857 Source: Research Dept, REPro Knight Frank 7 NEIHU TECHNOLOGY KEY FINDINGS PARK Leasing Market companies have started to relocate Market rental in Neihu Industrial there.