Record Kuo Hua Building bid to fuel boom

The sources said that Taiwan Life Insurance offered to buy the commercial building at a price of up to NT$6 million per ping (one ping= 36 square feet), a record-high price in the Chungshan District.

This is expected to bolster the overall commercial building market in Taipei, the sources said.

The building, constructed some 20 years ago, has witnessed the rise and fall of the Kuo Hua Life Insurance Co., headed by Weng Ta-ming, the famous textile tycoon. His Hua Loong Textile, Kuo-hua’s parent firm, suffered serious financial troubles amid the Asian financial storm of 1997.

Kuo Hua was forced to extend financial support to Hua Loong, and was therefore repeatedly requested by the Ministry of Finance and the Financial Supervisory Commission to improve its financial structures.

As a result, Kuo Hua has gradually slumped from the No. 4 life insurer in Taiwan at its peak to its current position, which fluctuates between 12th or 13th among a total of 29 domestic and foreign life insurance firms operating on the island.

Although suffering, Kuo Hua Life Insurance boasts a lot of real estate, including one commercial building in Xinyi Road, Taipei, two office buildings in Chungho, Taipei County, and one commercial building in Hsinying, Tainan County.

With this, the firm still enjoys sizable income from monthly renting.

Meanwhile, realty analysts said that the high bidding price for Kuo Hua Life Insurance Building will serve as growth momentum for the local market for commercial or office buildings.

The analysts said that the office building market bottomed out late last year and has been trending upward at an accelerated pace this year, due mainly to quite a few life insurance firms and foreign institutional investors rushing to acquire investments in the sector.

Even individual investors in residential housing units have also shifted their investment to office units.

According to statistics released by a local commercial realty brokerage house, total transactions of commercial or office buildings in Taipei amounted to NT$29.5 billion in the first nine months of the year, some 3.8 times the corresponding figure of NT$7.765 billion recorded one year earlier.

The same tallies indicated that the office vacancy rate in Taipei dropped to 6.55 percent in the third quarter of the year from 6.99 percent in the second quarter, and the average monthly rental in the metropolitan city also edged up 0.48 of a percentage point from the second quarter to NT$1,801 per ping.

The steady growth has attracted quite a few individual investors to join the office market. Market experts said that the average investment return rate for this sector has reached 4 to 5 percent, much higher than the deposit interest rates.

Both institutional and individual investors shared the view that Chinese and international enterprises would be lured to set up business footholds in Taipei.

In order to do this, three direct links across the Taiwan Strait, including air transportation, must realized, thus leading to strong demand for offices and bright prospects for office and commercial building owners in Taiwan.

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