Taiwan commercial property investment drops 33% to USD1.1b in Q1

Supply shortage is one of the main culprits.

A recent Savills report reveals that the total transaction volume of commercial properties in Taiwan for the first quarter of 2022 fell by 33% to NT$34.1 billion (approx. US$1.1b) as developers and technology companies sounded a cautious note. 

The shortage of supply, such as ageing buildings with redevelopment potential or factories which fit user requirements is the main reason behind the lower activity levels. Insurance companies, however, showed a strong appetite, purchasing NT$21 billion worth of properties in the first quarter before interest rates rose, accounting for 61% of total transactions. 

Here’s more from Savills:

In a notable deal China Life acquired an en-bloc Grade A office building in Taichung City for NT$12 billion, the largest deal ever in the city providing a yield of over 2.5%. In addition, TransGlobe Life purchased a property portfolio in Hsinchu City with a mix of asset types including a 257- room hotel, a small office building, and a building occupied by KTV operators. The seller provided a sale and leaseback structure for 20 years with an expected yield of over 3%. 

In terms of the land market, total land transactions reached NT$51.2 billion in Q1, the same level as the previous year, and developers accounted for 72% of the total. Even though the government and the Central Bank rolled out several measures to tackle surging house prices, including tightening the credit of developers and home buyers, the residential market has remained strong. 

Looking forward, the upcoming measure to ban the resale of uncompleted residential units is expected to restrain speculation. However, the rapid rise in construction costs makes it hard to see how house prices could fall in the near term.