Investors and entrepreneurs in Taiwan are embracing serviced office space. In fact, some business center operators there are reporting that serviced office space in Taiwan is officially a well-established mature market segment.
What does this mean for business center operators in Asia? It could spell opportunity. Although you should conduct your own due diligence because there are conflicting reports on the market, numerous signs point to growing opportunities there.
Indeed, the Executive Centre expects the demand for alternative workspace will remain steady in a short term, but points to a huge potential in the face of Taiwan’s closer economic bonding with mainland China and a general business confidence rebound.
For example, the Taipei World Trade Center, which is Taiwan’s largest trade promotion agency, is opening an office in Beijing this week. That marks the center’s second office in the mainland. The Beijing and Shanghai offices aim to help Taiwanese businessmen leverage opportunities in the Chinese mainland market.
And this is just the beginning. According to Wang Chih-Kang, the center’s president, The Taipei World Trade Center also plans to open offices in other mainland China cities. At the same time, the China Chamber of Commerce for the Import & Export of Machinery & Electronic Products is reportedly planning to open an office in Taipei this year.
These deeper ties with mainland China alone could spur a greater demand for serviced office and virtual office space. But this is only one of the factors worth noting.
Rising Demand for Workspace
Another indicator is the static, yet substantial demand for workspace. According to The Executive Centre, workspace in Taipei has always witnessed strong demand because of its limited supply. A recent report from Colliers International backs up this assertion.
The Colliers report shows that class A office space net occupancy was 6979 ping in the second quarter of 2012. That drove the vacancy rate down by 1.3 percent to 10 percent, the lowest since the first quarter of 2009. Colliers predicts the average office rent will remain stable or possibly post a slight growth. Likewise, the serviced office market is in progress of a slow recovery.
“Three thousand five-hundred workstations are currently provided in Taipei by major serviced office providers at an average from 3000NTs/ping/month to 8000NTs/ping/month,” says Jacqueline Lin, head of The Executive Centre’s Taipei operations. “Flexible leasing terms and the prospect of minimizing overhead expenses are significant appeals to SMEs and even corporations under the uncertain global economic climate. The Executive Centre’s occupancy rate has been as high as 94 percent and sees no sign of falling.”
Catering to Taiwan’s Specialties
Taiwan is the world’s 26th largest economy. The nation has established a foothold specializing in the production and export of electronics and machinery. For example, Taiwan is one of the world’s largest suppliers of computer chips, LCD panels, DRAM computer memory, networking equipment, and consumer electronics.
“Along with consultancies, headhunting firms and pharmaceutical companies, information technology is also The Executive Centre’s major source of clients,” Lin says. “With trending demand for digital products, we are confident Taiwan’s economy will continue to benefit immensely from the IT industry.”
Business centers that cater to these industries, then, could see a business boom. Or maybe not. Despite The Executive Centre’s outlook, a Business Monitor International (BMI) report claims that, after fleeting optimism in the first few months of 2012, Taiwan’s economy may face further struggles, stemming primarily from deterioration in the high-tech segment of the market.
“Weak exports and a struggling construction sector are set to be the main drags on real estate growth,” the report predicts. “This, in turn, has the potential to depress performance in both the industrial and office sub-sectors of the real estate market, and any longer-term slowdown would adversely affect private consumption and thus the outlook for the retail sector.”
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Serviced Offices in a Recovery
However, BMI may not have taken into account a recent report from Global Investment Trends Monitor, or the unique benefits of serviced office space compared to traditional office leases. In the healing period, serviced offices can well find a comfortable position in being an inspiring workspace solution to businesses who are just gaining back on their momentum.
And the report from Global Investment Trends Monitor points to a healing period. The United Nations Conference on Trade and Development (UNCTAD) recorded Taiwan’s FDI inflows rose to US$1.8 billion in the first half of 2012, from an outflow of US$1.4 billion over the same period of last year. The GDP of Taiwan expanded 0.98 percent in the third quarter of 2012 over the previous quarter, seeing a steady recovery over the year. The indices suggest a climbing confidence from investors and businesses.
Positive Banking Factors
In another plus for Taiwan, the nation signed a Memorandum of Understanding (MOU) on Currency Settlement with mainland China in August. The MOU may pave the way for a Cross-Taiwan Strait Currency Settlement Mechanism to minimize exchange cost and the transaction risk involved. Under the current system, only offshore banking units of Taiwan banks are eligible to do RMB-denominated business, with the currency transactions settled through an international settlement mechanism.
Once the mechanism is established, domestic banking units (DBUs) of Taiwan banks will also be allowed to conduct RMB-denominated business. The materialization of the agreement will be a milestone in the economic relationship between mainland China and Taiwan and can definitely fuel foreign, mainland Chinese as well as local investment in Taiwan.
Serviced offices can be an optimal comfort zone for entrepreneurs who look for an immediate presence in Taiwan. New set-up companies can reap a professional business environment that offers prestigiously located, well-equipped ready-to-work serviced office space.
2013 Business Center Market Outlook
Taiwan’s serviced office sector is enjoying the stability of a mature market with rental difference of 2 percent to 3 percent per year (up or down). With that history in mind, minimum short-term growth is likely to occur in 2013 as indices show that the market is still recovering.
Business center vacancy rate may drop indebted to occasional leasing transactions from relocation and expansion. However, greater potential is waiting when a closer mainland China-Taiwan economic relation is achieved through Cross-Taiwan Strait Currency Settlement Mechanism.
The Executive Centre is pressing into the opportunity. The Executive Centre has a network of 50 centers in 18 cities across Asia Pacific. Paul Salnikow, chairman and CEO of The Executive Centre, says his firm is well equipped to harvest from the much anticipated boom that the market can provide.
“The Executive Centre shows no signs of slowing down. Since 2005, our business has grown by 261 percent compared to an industry average of 73 percent. Over the past three months, we have launched new premier office facilities in Singapore, Shenzhen, Shanghai, Chengdu, Mumbai, Sydney, Brisbane and Perth,” Salnikow says.
“Our expansion plans at prime CBD locations across the region are also ongoing. Leveraging the rising demand for premium serviced office space driven by companies seeking the advantages of flexible workspace solutions, we are confident of the growth at The Executive Centre in the coming years both in terms of capacity and revenue.”