Commercial real estate ROI slows in Taipei


By John Liu, The China Post

TAIPEI, Taiwan — The return on investment for Taiwan’s commercial real estate market has been low in the past two years, and many investors have switched their investment targets to New York, London and Tokyo, among others, according to a real estate consultancy. Local real estate consultancy REPro and international real estate consultancy Knight Frank announced their formal strategic alliance yesterday. According to the real estate alliance, storefronts, offices and factory buildings make up the majority of the local commercial real estate market, whereas storefronts and offices comprised half of total transactions. The average office building price in Taipei rose by a factor of 2.3 over the past decade, resulting in a 2.5-percent capitalization. In the case of A-class office buildings, the capitalization was as low as 2 percent, lower than those in Hong Kong, Japan and London. REPro forecast 70,000 additional ping (one ping is equivalent to 36 square feet) of supply in A-class office buildings in the next two years. Past experience shows that on average 20,000 ping of office buildings were utilized per year. As such, the real estate agency forecast substantial office vacancy down the road. When selecting commercial real estate investments, it is important to consider rent increase potential and marketability in the future, REPro said. Prices of Taiwan’s upscale apartments, better known as luxury apartments among locals, are no longer increasing as rapidly as they used to be, the real estate agency said, adding that banks are now more likely to adjust interest rates upward.

In addition, the government is set to launch a new round of measures to suppress rising prices of luxury apartments, which makes it all the more important to select properties with unique features, the real estate consultancy said. The real estate firm pointed out that some investors have begun to search for investment targets in the U.S., Japan, Britain and Malaysia in an effort to diversify portfolios and minimize risk. The rate of return in big cities such as New York, London and Tokyo can be as high as 4 percent. Rental prices in these cities are also rising fast, which deserves attention, the agency said. The real estate market has been going strong for the past 12 years, REPro said, adding that the nation’s housing prices have gone up between threefold and fourfold in this period, while prices of commercial properties have gone up between twofold and threefold.