Commercial property sales growth expected to continue in 2019

2019/02/05 12:32:26 fontsize-small fontsize-default fontsize-big
Commercial property sales growth expected to continue in 2019

Taipei, Feb. 5 (CNA) Growth of commercial property transactions in Taiwan for 2019 will continue after a strong showing in 2018, when sales moved sharply higher from a year earlier, according to an economist with the Taiwan Institute of Economic Research (TIER).

"Although the pace of the local gross domestic product (GDP) growth will slow to some extent this year, demand for office spaces in Taiwan is expected to remain in place to push transactions of commercial property higher in the year," Fang Chun-te (方俊德), a researcher with TIER, one of the leading think tanks in Taiwan, told CNA.

At the end of November 2018, citing a slower global economy caused by trade tensions between the United States and China, the Directorate General of Budget, Accounting and Statistics cut its estimate for Taiwan's economic growth to 2.41 percent for 2019, down by 0.14 percentage points from an earlier estimate made in August.

However, despite the economy growing at a slower than expected pace, transactions of commercial property rose last year, according to industry findings.

Data released by commercial real estate advisory firm Colliers International showed that transactions of offices, shops and factories in Taiwan last year hit NT$80.9 billion (US$2.63 billion), up 48.17 percent from NT$54.6 billion a year earlier.

The real estate agency said it was the first time in three years for commercial property transactions in Taiwan to breach the NT$80 billion mark, ending the sales doldrums in the previous three years.

But the pace of growth in the sector might be less significant this year, it said.

"Due to the expected slower economic growth, the 2019 commercial property transactions are unlikely to increase as significantly as 2018. But an uptrend is expected to continue," Fang said.

"If more and more Taiwan investors operating in China relocate their investment to Taiwan to shun the impact from the Washington-Beijing trade disputes, the local commercial property market is expected to get an additional boost this year," Fang said.

With the government having intensified efforts to encourage Taiwanese firms operating in China to return to Taiwan to avoid higher tariffs for their exports to the U.S. as a result of the U.S.-China trade war, dozens of Taiwanese firms have expressed an interest to come back, according to the government.

"Now Taiwan first needs to create a good environment, land, water, electricity, talent and labor -- we must make sure all these are in place, in addition to administrative efficiency and digitalizing our services," Economic Affairs Minister Shen Jong-chin (沈榮津) told reporters late last year.

"These should be what the investors care about the most," Shen said.

Commenting on Collier's data, Fang said the soaring commercial property transactions seen in 2018 largely reflected strong demand for office spaces, in particular in Taipei, the most closely watched property market in Taiwan.

Echoing Fang, Collier's data showed that among the top 10 transactions in the local commercial property market was only a deal topping NT$10 billion in value, in which the conglomerate Formosa Plastics Group (FPG) spent NT$18.7 billion to buy three office buildings in Taipei's Neihu district to serve as the group's headquarters.

In addition, Sunny Bank acquired an office space in a listing of a pre-sale property project located on Zhongshan North Road, downtown Taipei, for NT$7.65 billion, the data indicated.

"Since office spaces in Taipei were in demand, rents in the capital city increased in 2018, accordingly, and such growth is expected to continue in 2019," Fang said.

According to Collier, a total of 61,479 pings (202,880 square meters; one ping equals 3.3 square meters) of floor space in the city were rented last year at an average price of NT$1,868 per ping a month, which hit a new high in 10 years.

Collier said the average rent for premium office space in Taiwan was about 39 percent higher than the overall average.

Due to a limited supply of new office space in Taipei over the next three years, the average rent could top NT$1,900 per ping, to hit another new high, according to Collier.

Meanwhile, the manufacturing sector was the largest buyer of commercial property in Taiwan in 2018. Manufacturers spent a total of NT$34.6 billion on property purchases, up 105 percent from a year earlier, accounting for 42.77 percent of the total transactions, Collier said.

The financial sector served as another major purchaser of commercial property last year after spending about NT$19.7 billion in 2018, up 85 percent from a year earlier and making up 24.35 percent of the total transactions, Collier added.

As for land transactions, Collier said, sales value hit NT$182.2 billion, a new high in five years as construction firms, financial and insurance companies, as well as manufacturers were keen to raise their land purchases.

What may also be driving the demand for land is a trend of increasing foreign direct investment in Taiwan since 2016. Foreign companies including Google have made plans or have already set up R&D and other facilities here, before the trade war erupted. They were drawn by Taiwan's relatively lower costs -- including wages, land and utility prices -- as well as its abundance of high-tech talent and strong technology supply chain.

Tom Devine, president of U.S.-based INNOViON Corp. said in a recent investment conference held by the Ministry of Economic Affairs that the first thing came to his mind about Taiwan was many talent people.

Taiwan has "outstanding universities, outstanding tech talent people, working in the semiconductor industry."

In addition, Taiwan's infrastructure is incredible and the government is stable, Devine said.

"We've found tremendous support from the government to help us with these projects," he said.

(By Frances Huang)

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