Taipei office rents to grow by 2-3% in 2022
There are no major projects in the pipeline until 2023.
Demand for office spaces in Taipei remained steady in Q3 2021. According to JLL, the negative net absorption of -4,100 ping was driven by several postponed relocation plans caused by the increasing COVID-19 cases at the beginning of the quarter. The vacancy rate still remained low at 2.4%.
Here’s more from JLL:
While the overall leasing activity is driven by rental contract renewals, relocation and expansion demand enquiries also drove demand in the quarter. With limited available space in the Grade A office market, large-scale demand can only locate in the Non-CBD areas like Neihu.
No major project to come online until 2023
Most of the upcoming new projects in the last two years are either owner-used spaces or already pre-leased. Plus, another noteworthy factor is that the emergent epidemic in Taiwan is likely to delay construction timelines in the near future. Market supply will continue to be tight in the near future.
A few more office plans are still under construction. Nearly 57,000 ping and 86,500 ping of new office space will be released onto the market in 2023 and 2025, respectively. It is likely that the market will become more active thereafter. Leasing momentum has therefore shifted to the pre-committed market while only just a few office landlords are ready for leasing.
Rental growth is still hindered due to lack of new supply
Potential demand remains strong, but the remaining leasable space is limited, and there is still room for rent upward adjustment; it is estimated that the overall rent will grow by 2-3% in 2022.
It is estimated that the rent in 2022 will have the opportunity to break through the historical high and reach NTD 3,000 per ping per month.
Outlook: Office investment sentiment is expected to remain robust
Strengthening demand on the back of Taiwan's reported significant economic growth of 5.88% y-o-y, and the central bank unlikely to tighten its monetary policy, coupled with global economic recovery should see rents continues to firm up in the upcoming year.
Given the lack of office supply in Taipei CBD, it is expected that the major deals will be mainly executed in Non-CDB areas, such as Neihu and Beitou, where large-sized office spaces can be utilised for business headquarters. These Non-CBD areas also demonstrate strong demand for industrial properties.