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BMI View: The brief Taiwan recession - ending in Q216 and resulting in a trade volumes slump for the
export-orientated nation - sent shockwaves through the economy, affecting foreign direct investment flows
and seeing domestic demand dwindle. As a result, the commercial real estate industry has been rather
dormant over the course of 2016, with only eight transactions recorded in the last six months. A return to
growth for Taiwan will bode well for the commercial real estate in the long term; however, prices are
expected to fall over the remainder of 2016 and pose risks to the industry in the short term.
The recent slowdown in Chinese economic growth has had a significant influence on Taiwan's exportdriven
economy, considering that China is Taiwan's largest export market, accounting for approximately
40% of total exports. A decline in demand from China saw Taiwanese exports encounter a 17-month slump,
which resulted in the Asian Tiger economy dipping into recession. As a result, Taiwan was sluggish over
H116, with lower global demand and potential fed rate hikes further dragging down on economic activity. A
recent return to growth in Q216 indicates the economy has emerged from recession, and will improve
sentiment over the long term; although pressures from insufficient domestic investment and lethargic export
growth will weigh on short-term growth potential, and drag on the commercial real estate industry.
Taipei is Taiwan's capital and maintains central investment focus for commercial real estate in the country.
We attribute this to the robust economy here, where tourism is growing rapidly, consumers are spending
more and companies continue to seek space for establishment. There is a robust retail market in Taiwan, and
consistent demand from new companies maintains a healthy office sub-sector. Industrial establishments are
usually located in close proximity to the city and an efficient infrastructure system allows for easy access to
key areas of Taipei.
Concerning the commercial real estate sub-sectors, the uncertain economic condition has had implications
for the Office and Retail commercial real estate sub-sectors, where subdued domestic demand and reduced
foreign investor sentiment have brought about a drought in market activity. However, Taipei's reputation for
business is renowned across the globe, with growing tourism and a transition into a tertiary-based economy
aiding future prospects for commercial real estate growth and demand. Rentals are high in Taiwan and some
companies have moved into secondary locations to reduce costs, which we anticipate will restrict further
rental growth. Although, as the economy continues with a tentative recovery, we expect to see demand rise
again; offering opportunities as there is currently a lack of supply.