Taipei , Taiwan

Taichung City has become attractive overall on the Island for 2006 with the exception of metro Taipei Area. Taichung’s office market was played up in the early 1990’s resulting in oversupply; thus, the office properties have dragged down the overall properties’ market. Therefore, the office market has been in a depressive state for the succeeding decade.

The office market has seen positive growth within the past year due to market adjustments and construction of several major infrastructures such as a new city government complex, an international conference center, an amphitheater, a national concert hall, a baseball stadium, and a MRT system; these developments also lead to Taichung gradually grow into a global city. The Three Links issue between the Mainland and Taiwan has caused many investors to enter in this market.

The target tenants for Taichung City are small to medium enterprises, or branch offices of large conglomerates. Since the rental prices are relatively lower when compared to Taipei CBD, the?“quality” of office buildings will be the deciding factor rather than the “rental price.” In general, office spaces below 100 ping with good location, layout, and management are the choice spaces in the market even though rental prices are relatively higher. By contrast, the vacancy rate remains higher for office buildings with inferior management or tenant mix.

Putting aside the Three Links issue between the Mainland and Taiwan, the overall development of Taichung has shown positive growth, and the office market has been stimulated owing to the construction of major public facilities. However, the disparity between demand and supply is a structure problem; thus, the oversupply requires a certain period of time for absorption by new demand. Generally speaking, the office market in Taichung City is expected to grow positively; however, whether the amount and the speed of the absorption will be dramatically increased is uncertain and should be seriously considered. Hence, it is anticipated that the existing inventory and the new supply will significantly be competed in the future.

It is suggested that developers conduct a more professional valuation and market survey to determine their entry plan and timing before they engage in the market. Doing so can help developers capitalize on the best opportunity and create a sound development plan.

They consider Taichung to be a future link between the Mainland and Taiwan as the closest port for doing business across the straight. As a result, the market has been recovered due to this expectation. The Central Taiwan Science Park attracts technology industries and related services industries to establish a presence in Taichung City. Net absorption and rental price have improved due to the aforementioned reasons, and it is clear that the Taichung market is in the growing stage. Many construction companies consider the Taichung market a good investment; thus, they enter the market by direct purchase or construction. For instance, Sweeten Construction Co. Ltd. bought a parcel at the intersection of Shihjheng N. 5th Rd. and Wunsin Rd., where they expect to build a high-quality office building. In addition, Highwealth Construction Co. Ltd. purchased an office building located on Sec. 2, Taichung Port Rd. by NT$1.33 Billion.

The vacancy rate for office buildings in Taichung City is forecasted between 15% and 20%. Among all, the office market in the New City Government Complex District is considered to have the development potentiality with a vacancy rate below 10%. The average month rent reaches NT$700~NT$800/ping/month, which is a wide gap compared to other areas in Taichung City, where rental prices are approximately NT$400~NT$600/ping/month. It is clear that the difference in price will be largely decided by location.

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Contact Information

Denny Yang Director | Professional Services Colliers International Ltd Taiwan Branch (T) 02 2719 6006 (F) 02 2545 0048 Denny.Yang@colliers.com

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