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Updated Wednesday, March 25, 2009 10:25 am TWN, The China Post news staff

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Economic slump lifts office vacancy rates

TAIPEI, Taiwan -- Office vacancy in Taipei and major cities in China continues increasing sharply as a result of weakening demand caused by the ongoing global economic downturn while the supply shows no signs of declining.

The vacancy rate for premium office premises in Taipei has surged to 9.9 percent from 7 percent at the end of 2008 mainly because shrinking business operations forced firms to lower-cost places.

The pullout left about 12,700 per ping (one ping = 36 square feet) offices vacant in downtown area since the turn of the year.

Data gathered by commercial real estate agency Jones Lang LaSalle show the rentals for top-notch offices dropped by 4.78 percent to an average of NT$2,486 per ping from the previous quarter, setting the steepest quarterly decline since the outbreak of SARS (severe acute respiratory syndrome) in 2003.

Yet Taipei still fared better than the major markets on the other side of the Taiwan Straits, including Beijing, Shanghai and Shenzhen.

Executives at Jones Lang LaSalle said Beijing will have the biggest supply of estimated 700,000 ping in new office space as realty development companies have been speeding up the construction work held up by the Beijing Olympic Games last summer.

Surveys conducted by Colliers International show that vacancy rate in China's capital has soared to 18-24 percent from 12-15 percent in the final quarter of last year as multinational corporations hit by the global financial storm have cut budget and costs.

A report released by Jones Lang LaSalle last week projected the office vacancy rate in Beijing could eventually climb to 36 percent this year as some more pessimistic analysts predicted the vacancy may even reach 40 percent as the world economy is seen to drag on.

The supply of new offices in Shanghai will increase 280,000 ping this year. The pullout of export-oriented companies also helped boost the vacancy rate to 15-20 percent from 10-13 percent in the last three months of last year.

One forecast projected the vacancy rate is expected to reach a record high of 25-30 percent by the end of the year.

The similar situation also took place in the major satellite cities surrounding Shanghai.

The sustained rises in vacancy have also induced a drop in rental, sliding by 15-20 percent in both Beijing and Shanghai so far this year.

Projections of Jones Lang LaSalle see a rise of the vacancy rate to 27 percent from 23 percent in southern Guangzhou City and a surge to 24 percent from 17 percent in Shenzhen.

But a bright spot against the gloomy picture was an increase in the transaction of luxury residential housing in Shanghai after Beijing authorities adopted measures to stem the slide in housing prices in the second half of last year.

Realty agents said the recovery in the trading of apartments of medium prices started at the beginning of the year as more investors started taking advantage of the steep drop in prices.

But transactions of newly completed posh apartments with higher prices has also picked up since the first week of this month, they said.

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