Taipei gross office leasing volume hits 3-year highs

This is the city’s strongest performance since the pandemic.

In Taipei, the gross office leasing volume in 2023 reached its highest level in the past three years at 17,600 ping according to JLL, showcasing its most robust performance post-COVID-19. 

When comparing 4Q23 with its corresponding period in the preceding two years, the average growth was 4.0-4.6 times higher. This surge underscored an augmented confidence in the economic recovery anticipated for 2024.

Here’s more from JLL:

The biotech industry accounted for 39% of the total leasing volume in 4Q23, reflecting the ongoing wave of biotech company IPOs aimed at enhancing market value. The Taiwan Stock Exchange officially introduced its “Biotech Industry Development Strategy” at the beginning of 4Q23, anticipating substantial growth in the market value of the biotech sector.

Tenant movements driven by future developments

During the quarter, the Dunhua South submarket witnessed a notable surge in the vacancy rate. This shift was ascribed to ageing properties and a scarcity of anticipated new completions in the next three years, prompting discerning tenants to explore alternative options beyond this submarket.

Conversely, the Others submarket excelled in leasing volume in the quarter, marked by a significant 2.5% reduction in the vacancy rate. This could be attributed to tenants foreseeing the favourable impact of the West Zone development plan, resulting in heightened demand and increased occupancy in the area.

Shifting dynamics of submarkets reflected in rent growth

In the Others submarket, particularly around Taipei Main Station, Grade A offices demonstrated formidable performance during the fourth quarter. This phenomenon underscored businesses’ heightened emphasis on budget compatibility compared to other submarkets with higher rents, taking into account regional future development and comprehensive rent considerations.

Over the course of the year, Xinyi District boasted the highest concentration of Grade A properties, consistently standing out as the preferred destination for major lease contracts. Notwithstanding its prominence, the Xinyi District witnessed subdued demand for leasing in the fourth quarter. This phenomenon underscored businesses’ discerning approach to high rents.

Outlook: Landlords to use tenant-attracting strategies in Others submarket

In the Xinyi submarket, where Grade A offices convene, rents have emerged as a crucial factor affecting tenant occupancy. The growth in rents has experienced a deceleration due to a scarcity of new supply and the budgetary constraints faced by tenants.

In contrast, the Others submarket is expecting a substantial surge in market supply in the upcoming years. As a result, landlords there are strategically positioning themselves to compete for lease agreements by providing favourable terms and conditions, in an effort to attract tenants over the next three years.

Note: Taipei Office refers to Taipei's overall Grade A office market.