Taiwan’s property market is heating up thanks to factory reshoring, bucking regional gloom
- Taiwanese authorities say about 40 domestic firms are eyeing move back from mainland China as trade war bites
- Tight office supply in Taipei central business district points to falling vacancy rates, rising rents
A manufacturing uptick that promises to put the sparkle back on the “Made in Taiwan” label is helping bolster the island’s real estate market, according to analysts.
As manufacturers in mainland China seek out new domiciles for production amid the ongoing trade war between Washington and Beijing, Taiwan has come back into focus as a reasonable alternative.
“We see a lot of manufacturers or companies that are retreating partially or moving back some of their factory activity from China,” said Ricky Huang, general manager at Savills Taiwan. “They want to relocate back to Taiwan so this boosts the transaction of industrial and office property.”
Huang said inquiries from property investors about opportunities in Taiwan have picked up sharply in the last six to eight months.
“We do hear many inquiries from regional funds and foreign investors,” Huang said.
Among Hong Kong investors active in Taiwan recently, Huang cited boutique investment firm Arch Capital Property Advisors’ acquisition in December of a 50 per cent stake in Taimall Shopping Center in Taoyuan for US$450 million.
Acquisitions of income producing properties in Taiwan last year – defined as office, retail, industrial, hotel apartment and senior housing – surged 91 per cent on year to a record US$4.6 billion, according to Real Capital Analytics.
During the fourth quarter of 2018 investment activity in Taiwan rose 135 per cent on year, compared to a 23 per cent decline across the region. New Zealand was the only other market among the 10 tracked in Asia-Pacific to record an uptick in activity for the fourth quarter, according to Real Capital Analytics.
About 40 Taiwanese companies would like to reshore production back to the island from China, requiring 100,000 square metres of industrial space, according to Taiwan's Ministry of Economic Affairs.
Savills research showed that factory transactions in Taiwan in 2018 were the highest since 2010, with US$722 million of industrial property sales in cities including Taipei, Taoyuan, Tainan, Kaohsiung and Taichung. Taiwan’s industrial property sales reached US$490 million in 2017.
Among high profile deals last year, Japanese firm Itochu Corporation became the largest foreign shareholder in Taipei 101 after buying a 37.2 per cent stake in the skyscraper from Ting Hsin International for US$665 million. The deal was completed in August.
Other deals underway include Hong Kong-listed Nan Hai Corporation, which has partnered with Malaysia’s Malton Berhad, in bidding earlier this year for a government contract to build a high-rise complex featuring retail, office space and transport links in Taipei.
“Every year, roughly 65 per cent of lease transactions are committed by new multinational corporations establishing operations in Taiwan leasing commercial units,” said Tony Chao, managing director at JLL in Taiwan. “In 2018 alone, over 200,000 square metres of demand was added to the Taipei commercial market, which further implied that corporate confidence for the city remained strong,” Chao said.
“According to our research, rents have been growing for the past three years, and occupancy rates of new office buildings completed in the last two to three years are going up. New buildings can be leased out in 12 months or 18 months,” Huang said.
In the fourth quarter of 2018, average monthly commercial property rents in Taipei were US$28.6 per square metre, reflecting growth of 3.4 per cent on year.
Erin Ting director of research at Savills Taiwan said only eight buildings with a total 313,000 sq m of office space will be completed in the central business district of Taipei through 2022.
“In the next two years, however, only two buildings will be completed and one is the headquarters of a local insurance company. Therefore, only one building with a total office space of 13,500 sq m will be released to the market,” Ting said.
Derek Huang, Colliers International executive director, said investors believe that cooling measures implemented by the government have taken effect and property prices appear to have bottomed.
In 2015, Taipei implemented a new real estate tax system that charged levies based on the real transaction price rather than the government’s assessed value. Rates for short-term property transactions and property holding taxes were also increased.
“Another reason for the rebound in 2018 was the brilliant performance of the Taipei office sector,” Huang said.
“The major players are mainly domestic investors, mainly because foreign investors will bear higher taxes than local investors since the introduction of the new tax system in 2015. However, an increasing number of foreign investors have also noted the potential of the Taipei market and seek potential investment opportunities.”
