Boston, MA -- (SBWIRE) -- 10/17/2013 -- BMI's Q413 Taiwan Real Estate report examines the commercial office, retail, industrial and construction segments throughout the state within the context of the country's optimistic yet vulnerable property market. Economic growth and demand, especially in the retail sector, will continue through the end of 2013 as domestic and regional consumption levels have boosted overall performance and additional investment. Concerns of a property bubble, especially in the office sector, have increased government efforts to curb speculative investment, while the relaxation of some capital and investment laws have allowed domestic firms to expand holdings internationally.

With a focus on the principal city of Taipei, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk.

The year 2013 has seen growth return to the Taiwanese economy, although a disappointing Q113 prompted significant revisions to the 2013 GDP forecast. Nevertheless, consensus remains optimistic that the economy will outperform 2012 levels, with projected growth now between 2.7-3.4%. The Taiwanese government in May had lowered its official growth forecast to 2.4% for 2013 from the earlier forecast of 3.59%, although this is now predicted to increase due to better than expected consumption levels and secondary tourist benefits.

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We remain optimistic that growth will continue into 2014, though a number of external factors, chiefly Chinese demand and tourist levels, could potentially disrupt this forecast. Earlier than expected reductions in US quantitative easing could also disrupt the investment climate as interest rates would face corresponding adjustments in the medium-term.

Key Points

- Increasing demand for retail and industrial space, coupled with the increase in trade activity has given us cause to believe that construction activity in Taiwan could see an extended short-term recovery, despite our expectations of an eventual economic slowdown in China, Taiwan's main trading partner. The year 2012 saw flat construction growth and we continue to predict a recovery of up to 4.9% through 2013.
- Over the long term, we are growing increasingly concerned about Taiwan's demographic profile and the lack of progress with achieving greater economic integration with China. Both factors could create a dour investment climate for construction, and we have revised down our long-term forecasts to reflect this outlook.
- We are cautiously optimistic on the country's growth prospects into 2014. Unless the government takes significant steps to reverse deterioration in the business environment, Taiwan will continue to be plagued by a dearth of foreign direct investment, which would in turn impede its structural growth prospects.

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