Taipei CBD to see 39,000 ping of new gross leasable office space in 2024
Rents are expected to continue rising until 2027.
In the next 12 months, there will be about 39,000 ping (gross leasable area) released to the market in Taipei CBD’s office market. According to JLL, Grade A office demand has remained strong in recent years, and rent is expected to grow steadily until 2027, by which the supply pressure is anticipated to ease.
Here’s more from JLL:
The demand for green-certified Grade A office space has become the new standard for tenants in Grade A buildings. As more green-certified office space is developed outside of the Taipei CBD by 2027, we can expect increased competition in the greater Taipei area and potentially higher vacancy rates.
Strong leasing activity and demand for green-certified office
Leasing activity has shown a notable increase in 3Q23, with the tech industry accounting for the largest share of leased space at 23.34%. Furthermore, the pharmaceutical sector has demonstrated a propensity to pay a premium in order to secure desirable office locations.
Prior to Fubon A25, there was a two-year absence of new supply leading to the quarter. Strong demand for larger green-certified office spaces, driven by multinational corporations’ adherence to regulations, is expected to persist. Furthermore, tenants have been observed relocating from existing Grade A offices to newly supplied green-certified buildings within the market in the quarter.
New supply spurs vacancy; a short-term impact
A significant 9.7% q-o-q increase in gross floor area was observed in the Xinyi market, primarily attributed to the introduction of new supply. Consequently, the vacancy rate rose to 5.3%, indicating a 3.8% q-o-q increase in Xinyi. Overall vacancy rate reached 4.3%, surpassing the longstanding threshold of 3% since 2Q19.
With the introduction of Fubon A25’s new supply, totalling 30,000 ping (leasable area of 21,000 ping), the net absorption amounted to about 16,700 ping. Given the robust absorption rate, we anticipate that the increase in the vacancy rate will be short term.
Strong q-o-q rent growth driven by new leases in Fubon A25
The q-o-q rent growth rate for the quarter has reached 1.8%, primarily driven by newly signed leases in Fubon A25, which has had a positive impact on the overall market. We expect to see a continued upward trend in rents for premium, newly released Grade A buildings in the next two quarters, as the demand remains strong.
In the Xinyi market, there is a significant gap in rents between Premium Grade A buildings and other Grade A offices. Premium Grade A buildings command a 10% higher gross rent compared to the market average in Xinyi.
Note: Taipei Office refers to Taipei's overall Grade A office market.