December 12, 2022
What is Driving Taiwan's Commercial Real Estate?
Are you planning to invest in real estate in Asia? Whether targeting commercial, residential, or industrial real estate, Taiwan is one of the highly attractive markets. Indeed, the local property market is booming as large companies seek to set up their operations on the island, owing to the territory's enviable stability, which was evidenced even during the COVID-19 pandemic era. This post takes a closer look to answer the big question, “how big is commercial real estate in Taiwan?” We will also explore some of the best strategies that are used to make the properties more sustainable and attractive.
The Size of the Commercial Real Estate Industry in Taiwan
In 2018, Taiwan was named the biggest investment destination by Business Environment Risk Intelligence SA. It only came behind Switzerland and Singapore. This interest has been growing over the years, with large brands, including Google planning to set up major centers on the island. So, what is the size of the commercial property market?
In the last quarter of 2021, commercial transactions shot up by 40.8% to USD 1.67 billion, which was largely driven by the industrial property demand in the Northern part of Taiwan. This trend is not showing signs of ebbing!
For the entirety of 2021, commercial real estate deals shot up by approximately 14%. According to this growth, office and factory space accounted for 66.5%. Industrial properties alone reported a growth of 42%, with most deals largely happening northward (Wakefield and Cushman). This is not all!
The demand for industrial property is expected to remain on an uptrend because more firms are looking forward to tapping into Taiwan's efficiency. Some are concerned about the regular and extended disruptions caused by the COVID-19 pandemic in jurisdictions like China and look to Taiwan to be able to operate more smoothly in the case of similar disruptions in the future.
In Taiwan, the supply of office buildings is pretty limited, which explains why new complexes are quickly coming up. Also, land deal activities are expected to remain on an uptrend in the coming years, although related transactions in the last quarter of 2021 slowed down a bit. Areas around the Taiwan Taoyuan International Airport and the rapidly upcoming business districts are expected to record a sharp rise in demand.
What is Driving Taiwan's Commercial Real Estate?
The demand for commercial real estate in Taiwan is only picking up after slowing down during the COVID-19 era. This brings about one more crucial question, "what is driving commercial real estate in Taiwan?” Here are some indicators:
- Stability of the Country
When people are looking for investment destinations, they are interested in generating as much profit as possible in the future. This is only possible in a jurisdiction that is stable economically and politically. Taiwan scores highly on both fronts.
Unlike other countries in different areas across the globe, where war and turmoil never end, Taiwan is the opposite. The country's leadership and currency have been very stable, allowing real estate investors to easily predict the expected growth and returns on their investments. For example, about 65% of lease transactions in Taiwan are committed by new multinationals that are establishing a base in Taiwan.
The main challenge to the jurisdiction's stability in Taiwan is the current tug-of-war with China. However, most investors feel that the issues can be handled diplomatically and are not willing to let go of the lucrative market. The good thing about Taiwan and China is that the two jurisdictions have so much to benefit from each other. For example, Taiwan sells many of its products to Mainland China while the latter relies on its semiconductor supplies to run its huge manufacturing sector.
- Enough Supply of Energy to Drive the Industries
Today, any country is considered to be on a growth trajectory based on its ability to meet all its energy needs. Indeed, many countries are running on deficits, which means they cannot support their targeted growth projections. Well, Taiwan is not one of them!
Taiwan is one jurisdiction that does not just produce enough energy to meet its domestic requirement but has a surplus. The country's total energy production is 246 billion kWh, which is more than the local demand by about 4%. The cost is also relatively low because the energy is produced locally.
- Steady Economic Growth
When it comes to investing, primarily when focusing on ethical and responsible development, experts like Climate Fresk recommend that you have to focus on economic growth. This makes Taiwan an excellent destination. Back in 1990, the Taiwan economy was only USD 42.28 billion. This has increased steadily over the years, hitting USD 774.7 billion in 2021. By 2027, the GDP is expected to cross the one trillion mark, taking it closer to some of the largest economies on the globe.
This steady growth is what most investors in commercial real estate are interested in because they can easily predict growth. Just like in China, more companies want to ride on the growth and optimize returns in the coming years.
- Taiwan is Home to Some of the Leading Companies
When setting up companies, investors are interested in ensuring they have all the supplies or raw materials of interest. Most tech companies, especially electronic manufacturers, are committing to acquire property and run in Taiwan because of the easy supply of crucial raw materials. Of notable consideration here are the tech chips, which are used almost in every electronic and machine we know of. Taiwan produces almost 90% of the global advanced chips and 65% of semiconductors.
This is why more companies are coming to Taiwan. Some of the most notable companies in Taiwan include Pegatron, Taiwan Semiconductor Manufacturing, the Union Bank of Taiwan, Formosa Petrochemicals and Hon Hai Precision Industry.
How to Make Your Property More Attractive in Taiwan
Now that you know the size of commercial real estate in Taiwan, it is important to appreciate the main ways that make properties attractive. For example, most industrial and office investors want to get properties that are developed to help them improve energy efficiency. Here are some expert suggestions for your commercial real estate.
- Develop Buildings to Support Specific Niches which are Growing Faster
Although it is true that commercial real estate in Taiwan is growing rapidly, it is important to take a closer look and be more specific as a developer or investor. The idea is to identify the niches that are more attractive and invest in them. For example, office and industrial spaces have high demand compared to residential units. Therefore, that might be an excellent target because of the projected growth in the coming years.
To rake in even higher returns, you might want to work with specific companies that are targeting to get into the Taiwan market. Most companies, both in manufacturing and retail, among other niches, want to get a smooth shift to the Taiwan market. So, consider being this important link and facilitator for the emerging market.
- Focus on Buildings that Help Occupiers to Improve Sustainability Rating
We are in the era of sustainability and no one wants to be left behind. In the real estate sector, investors are interested in selecting buildings that can help to improve their ESG rating. Therefore, you should focus on developing or acquiring property that promotes sustainability in the following ways.
- Ensuring the property has a good waste management system: This is important in giving property owners the assurance that their wastes will not harm the environment, biodiversity, people or compromise the aesthetic appeal.
- Limited damage to the environment during construction: When designing and constructing buildings, you need to ensure that there is limited damage. Even after completing the buildings, you can take additional steps by planting vegetation in the neighborhood. Remember that you can even support afforestation projects away from Taiwan and achieve the expected greening effect.
- Promote material recycling: The whole idea of sustainability is hinged on ensuring that both current and future generations have access to the resources they need. To help with this concept, you should consider using recycled materials when constructing a building. Remember that the materials should also not be harmful to the people who will use the building.
- Install Smart Lighting Solutions in Different Facilities
As we indicated earlier, corporates coming to Taiwan, especially manufacturing firms, are interested in keeping down their costs of operations. One of the ways of achieving this is by installing smart lighting solutions. These systems use sensors that only allow the lamps to go on when rooms or offices are occupied. It also implies that your company will not incur unnecessary power bills because staff forgot to switch off lamps when going home or during weekends.
- Use CONTINEWM to Improve Energy Efficiency in Properties
A big portion of the energy used in buildings goes to the HVAC systems. In most cases, HVAC systems account for 40% of energy bills. Well, you can facilitate a reduction of up to 50% through the use of CONTINEWM. This is one of the latest innovations that help to improve the efficiency of HVAC systems by reducing resistance to airflow. So, let's demonstrate how it works.
When an HVAC system installed in a building or office is running, the moving parts generate positive electrostatic charges. These charges cause a lot of resistance to the airflow, and CONINEWM works by clearing them away. It progressively generates negative charges that clear the troublesome positive charges, helping to lower resistance.
By improving airflow through the HVAC system, you are sure to enhance its efficiency by up to 50% for the building or office. CONTUINEWM is also pretty easy to install, affordable, and requires little to no maintenance.
Commercial real estate in Taiwan is pretty big and growing rapidly. The growing interest in the jurisdiction’s property market is hinged on its strategic location, stability, presence of major companies that supply crucial parts for manufacturing, and stability. Using the strategies we have highlighted above, you can expect growing interest in your properties from more parties. Make sure to also adopt sustainability training with Climate Fresk part of the effort to drive sustainability and success.
In Taiwan, you can never go wrong with the commercial real estate market!