When the suburb of Neihu was incorporated into Taipei City in 1968, it was still heavily agricultural. Today it is one of the fastest-growing, most vibrant parts of the city. The engine for much of that growth was the development in recent years of the Neihu Technology Park, which provided a home for high-tech enterprises closer to Taiwan's commercial heartbeat than Hsinchu. The district, along with adjacent Dazhi, is also obtaining a reputation as an attractive place to live, and when the American Institute in Taiwan moves to Neihu in a few years, the area is certain to gain even more prominence.

By Jane Rickards

Alan Huang grew up on a farm in Neihu over four decades ago, not far from where he now works as chief marketing officer for China Network Systems, one of the island's biggest cable operators. As a boy, he was expected to look after the ducks and help his father till the paddy fields. "There was rice paddy everywhere, “he recalls. “If you told people you lived in Neihu, they'd say: ‘Oh, you're from the country.’”

How times have changed. The district has been rapidly transforming into one of Taipei's major commercial centers, and the population has climbed to almost 270,000. Gleaming futuristic buildings are spread along RuiGuang Road, the main street of the Neihu Technology Park and the center of Neihu's business district. Conveniently bordered by the Songshan Airport, Nankang, Shilin, and Zhongshan, Neihu offers many advantages over other parts of Taipei as a business location, including new buildings, plenty of space, cheaper rents, remarkably convenient traffic links, and quick access to cross-Strait air travel.

In addition, the 10-year-old Technology Park  – headquarters to Taiwanese electronics giants Lite-On, Ben Q, and Compal – is reportedly the most prosperous such park in Taiwan and is continuing to attract more businesses to set up shop. And the island's über-rich are now forsaking places like Tianmu to move into luxurious apartments in Neihu and nearby Dazhi. “You could say it is Taiwan's hottest-growing district,” says Sherry Wu, national director for markets at real estate firm Jones Lang Lasalle.

Plans by the American Institute in Taiwan to build new facilities in Neihu and the recent extension of the MRT's Muzha line to the district – despite its initial operational problems – are adding to Neihu's attractiveness. The global financial crisis, moreover, has accelerated the shift in the center of gravity of Taipei's business life that began in the 1980s with movement away from the old downtown near Ximending – first to the ZhongXiao East Road area, then to the bustling Xinyi District, and now proceeding on to Neihu.

Neihu may not yet offer the cachet of a Xinyi location, but office space there rents for roughly half as much as in the central business district (CBD), allowing multinationals to save costs by setting up Taiwan operations there and still have a Taipei address. “The financial crisis has changed the [property] market hugely, “Wu says. “The multinationals do have pressure from their regional headquarters to reduce costs.”

Jones Lang Lasalle recently helped a large CBD-based company move to Neihu, Wu says, and another six clients currently are also seriously considering making the move. “They would never have considered Neihu two years ago,” she says. "Now we're seeing people not just considering this, but taking action." Even companies that need to present an upmarket image are looking at retaining their corporate headquarters in a prestigious area such as Xinyi, while moving back-office functions to Neihu. An example of this approach is the American International Group (AIG), which has its corporate headquarters in Xinyi's President International Tower, but in 2007 quietly moved its back offices to Neihu. Even after considering relocation and refurbishing costs, Wu says, the savings are still considerable. “Rents are the biggest reason why Neihu is a hot district,” she says.

Man Chan, associate director of office services for CB Richard Ellis, another leading real estate firm, says monthly office rents in CBD areas such as the Xinyi District typically come to around NT$2,500 (US$75) per ping, a unit equal to 36 square feet. Ke Ming-chun, a manager with Dazhi Sinyi Realty, adds that the number can be as high as NT$3,000. But in Neihu, the average cost for office rents stands at around NT$1,200 per ping. And unlike other, longer-developed areas of Taipei, the average age of Neihu's office buildings is a mere six years, according to a Jones Lang Lasalle report.

Although investors' strong interest in purchasing Neihu commercial property is causing prices to rise, Chan says, they have a long way to go before meeting the Xinyi average of NT$800,000 (US$24,240) a ping. At the beginning of the decade, the average price per ping for commercial property in Neihu was around NT$200,000. Now, depending on the age of the building and its location – prices are highest in the northernmost Xihu area, which is the most developed and closest to the MRT station, and tend to be lower in the southern Wende area, which can be up to a 20-minute walk from the MRT – the range is about NT$350,000 to NT$450,000 per ping. “Prices have almost doubled over this period,” Chan says.

Welcome institutional investors

At first only owner-occupiers bought into the commercial property market, but since 2005, institutional investors have started to enter the picture as well. A Jones Lang Lasalle report dated July 2008 notes that at least 15 major transactions worth a total of NT$45 billion (US$1.36 billion) had taken place since the first quarter of 2006. CLSA and Citi Property Investors, for example, have bought into Neihu's Asia Plaza in billion dollar deals. The huge amounts of money being injected into the Technology Park and the business district as a whole have pushed up purchase prices, but demand from tenants has not increased proportionately, keeping rents relatively stagnant. Nevertheless, says Chan, rental yields in Neihu – at around 3.5%, down from around 5% two years ago – are still slightly better than the 3% common in Xinyi, making them attractive to institutional investors such as insurance companies.

Sherry Wu adds that property owners currently have overly-inflated expectations, with asking prices for some commercial property on RuiGuang Road at the “ridiculous” level (about double what buyers are willing to pay) of around NT$700,000 per ping. “That may be the price three years later, but not now,” she says. The reason for the unrealistic expectations seems to be anticipation of a business boom stemming from the improved cross-Strait relationship under the new Kuomintang government. The Songshan Airport, which already offers some direct charter flights to the mainland, is only a 10 to 20 minute drive away from Neihu, putting China's main manufacturing areas within easy reach by air. “It makes it possible to do a one-day round trip from the Neihu Technology Park to the factories in China,” says William Tang, deputy director of the Taipei City Government's High Tech Promotion Center. He adds that once the air connections become regularly scheduled flights, expected to take place August 31, the air connections will be even more convenient.

Already, estimates Chan, 90% of the companies in the Technology Park have operations in China, and the Taiwan government is seeking to encourage other companies with facilities on the mainland to move their headquarters back to Neihu or expand operations there. At the end of June, the government also announced that the Taiwan property market would be opened for Chinese investment, but the results are not expected to be seen for another two or three years, Wu says.

In the meantime, the Neihu Technology Park has become a pull for all kinds of businesses in its own right. “People say this will be Taiwan's Silicon Valley in the future,” Ke notes. The park was created in 1995, with a first-phase area of 150 hectares (now 92% occupied) out of a total of 542 hectares allocated. Ultra-modern buildings, such as Lite-On's iconic headquarters, line its streets. Shaped like folded hands, and with distinctive and graceful curves at the peak, the Lite-On building won a prestigious award from the American Society of Landscape Architects in 2006.

Tang says that some 3,400 operations, including 26 company headquarters and 12 R&D centers, are registered as residents of the Technology Park, and around 100,000 professionals work there. It has also been a highly profitable place to do business, with average annual growth of about 30% in the total revenue generated by companies in the park. The revenue figure this year is likely to exceed NT$3 trillion (US$91 billion), Tang says.

The park tends to attract businesses involved in high tech, ICT, communications, biotech, consumer electronics, and research and development. Major foreign residents include French telecommunications giant Alcatel Lucent and America's Nvidia, a world leader in visual technologies. Swiss-based ST Microelectronics and Japanese electronics company TDK have also recently announced plans to enter the park, Tang reports. A Taipei location can be preferable for a tech company, he says, both for attracting "the critical asset of a high-quality workforce" and in obtaining access to capital.

Last October, the government announced plans to develop another 170 hectares of the park, more than doubling its size, and work has already started on half that area. Among the first occupants are expected to be such well-known Taiwanese companies as D-link and the communications networking firm Accton. Tang and Wu both predict that it will take another three to five years for the park to be fully developed, depending on the pace of global economic recovery. In the interim, the slowdown has contributed to the oversupply of office space, with many buildings standing empty. The government's ultimate aim is to merge the Neihu park with the Nankang Software Park and a planned Beitou-Shilin Technology Park to create a 768.65-hectare, 20-kilometer long technology corridor.

A few years ago the government began deregulating the park, a move that has been one of the main factors behind the district's buzz. Originally, explains Wu, strict regulations prevented most non-tech companies from getting a license to operate there. Now those rules have been liberalized, in the process making the area more convenient by bringing in amenities such as retail shops. Currently, the core occupants are tech companies and support industries, including bank branches, law offices, and accountants. The remaining tenants, such as trading companies, must pay a small fee toward the park's upkeep.

Techies like hogs

One unlikely example of a company hoping to cash in on the district's tech boom is Harley-Davidson. The American motorbike company opened its first and so far only Taiwan store on a street off RuiGuang Road last April. In contrast to the be-suited professionals usually seen in the neighborhood, Alvan Huang, the assistant general manager for sales and marketing, wears an orange T-shirt and sleeveless black leather jacket decorated with a winged skull on the back. The other staff members wear jeans. The company believes that well-off tech professionals may be looking for something new in their lives. "With high tech companies, people may earn a lot of money," Alvan Huang says, "but they may have no life. Harley-Davidsons are not just a transportation tool, they're also for leisure activities." All customers automatically become members of the Harley Owner Group (HOG) Taiwan chapter, which regularly organizes group rides. A national bike ride to Hualian in October is expected to draw over 200 bikers.

Besides wanting to locate their store near big spenders, Alvan Huang explains, Harley-Davidson needed a spacious outlet and one located in an industrial area so that it could set up its trademark repair workshop in the store. Neihu was ideal for this. People who spend money on such bikes are also potential car buyers, so Harley-Davidson wanted to be near auto dealerships. Huang points to the presence of many premium car dealerships in Neihu. "Ferrari, Mercedes-Benz, every brand is here," he says.

Also moving into the area are upstream and downstream suppliers to tech companies. Tang says the government is encouraging clustering with the hopes of turning the park into a technology innovation center. At the end of 2007, the city government set up an incubation center for start-up companies to upgrade their technological skills. It currently helps around 30 businesses.

As an example of the clustering effect, mobile broadband services provider Global Mobile moved into Neihu two years ago from inner Taipei in order to be close to its other business partners, says Stephen Tsai, the Chief Technology Officer. The WiMAX company was attracted to Neihu because of the presence of large telecom companies, such as Far EasTone, and equipment suppliers such as Samsung. "It's really easy to reach support services and our efficiency has increased," Tsai says. "If we want to organize a meeting with other businesses, everyone can get to the meeting within minutes."

The Taipei City Government has also done its part to enhance Neihu's business attractiveness. To help businesses cut through red tape, in July 2008 it set up a one-stop service window, known as the High Tech Promotion Center, where tech companies can deal with various government departments all in one place. In addition, the modern sports center that opened in February this year has drawn rave reviews, especially from expats. "It's fabulous," says Dwight Jurling, director of marketing services for Canadian software company Corel, which has its Asian-Pacific headquarters on RuiGuang Road. Besides a 25-meter-long swimming pool, the sports center offers many other activities such as squash and even archery. Those recreational opportunities, plus the presence of many restaurants, makes the area far more attractive to Western multinationals than it was in the park's early days, when the only place to eat was the company canteen and there was nothing to do after work. 

Local conditions will be further enhanced if plans proceed for the construction of several hotels in Neihu and Dazhi, and if the Taipei City Government decides to build a second sports center, a project currently under consideration, within the new 170-hectare expansion area.

A critical part of Neihu's success, from the viewpoint of both businesses and residents, is its traffic links, interviewees said. Despite complaints that arteries such as RuiGuang Road and the MinQuan Road Bridge can get quite congested during peak hours, most respondents praised Neihu's proximity to inner Taipei, which is generally only 20 minutes away by car. Unlike Tianmu, which relies on ZhongShan North Road as its sole connection to the CBD, Neihu has more options, including the tunnel between Dazhi and FuXing North Road and a series of bridges across the Keelung River. There is also the convenience of easy access to the No. 1 Freeway from either the TiDing Interchange in the western part of the district or the Neihu Interchange in the east.

Ahmen Lee, regional marketing and real estate manager for Costco Wholesale, says Neihu's wide spaces and good traffic connections to Taipei were the key reason why Costco decided to set up in Neihu. The store opened in 1999, when the area had barely started to develop, and such European-style hypermarkets as Carrefour and R-T Mart followed. The American membership warehouse normally attracts customers coming by car, Lee says, and the Neihu site was one of the rare locations in crowded Taiwan that is convenient for drivers.

Another reason Neihu turned out to be an excellent choice is that many of the highly-educated residents of the area had studied or worked in the United States and were familiar with Costco. Although Costco operates in several other locations in Taiwan, the largest number of members is still registered with the Neihu store.

Like living abroad

With its many parks, surrounding mountains, and the presence of several of Taiwan's top schools, Neihu is also becoming a popular residential area. As a new, planned community, it benefits from broad streets, more open space between buildings, and electrical power lines placed underground where they are not an eyesore. “People here feel as if they are living overseas in a foreign country,” says Ke of Sinyi Realty.

Residential property prices, which reached a low around the time of the SARS crisis five years ago, are soaring, Ke reports. Nearby Dazhi (which is technically part of the Zhongshan District but shares Neihu's buzz) is fast replacing Tianmu as home to Taipei's super-wealthy. The scenic stretch along the Keelung River, which offers views of the river, Songshan Airport, and surrounding mountains, has seen prices rise from under NT$600,000 per ping to as much as NT$1.3 million per ping over five years. Taiwanese tech tycoons, such as Morris Chang of Taiwan Semiconductor Manufacturing (TSMC), own apartments there, often the penthouses. The price per ping in an older four or five story apartment building in Dazhi has risen from around NT$250,000 to NT$400,000 over five years, Ke says, while for newer high-rises, prices have increased from NT$300,000 to NT$600,000 per ping.

In Neihu, residential prices are generally around NT$100,000 less per ping than in Dazhi, Ke says. Older apartments saw an increase from NT$200,000 to NT$300,000 per ping over five years, while newer buildings went up from an average of NT$400,000 to about NT$600,000. Prices rose most rapidly in 2007, showing a 30% increase by the end of the year, Ke reports, on expectations that Ma Ying-jeou would win the presidential election and proceed to establish direct cross-Strait air links from Songshan Airport.

The financial crisis then put a dent on property prices all over Taipei, Ke adds, but while they plummeted by 30% in most places, in Neihu the drop was only 10% to 15%. By June this year, prices were back to where they had been before the crisis. Real estate agents interviewed for this story said that the opening of the Neihu MRT line in the middle of this year did not have much effect on property prices as that development had already been factored into the market. 

Chan of CB Richard Ellis says that the most expensive homes in Neihu currently go for around NT$800,000 per ping. These large luxury apartments, often ranging up to 100 ping in area, were constructed by the Far Glory Group, a company that has also been active in developing the Neihu Technology Park. Ke predicts that property prices will continue to rise, especially if transport and business ties between Taiwan and China get closer. Some areas in Dazhi, she says, have the potential to reach as high as NT$4 million per ping over the next several years.

With its roughly 50:50 mix of residential and office buildings, Neihu is gaining a reputation as a nice middle-class neighborhood – quiet, family-friendly, and with plenty to offer in the way of healthy living, but little nightlife or activities for singles. “It's a good quality of life – very good for families,” says Jason Wang, managing director of Cypress River Advisors, who has lived in Neihu for five years.

Corel's Jurling also notes that while you can find places in Neihu for a good business lunch – including Thai, Vietnamese and Italian restaurants in addition to those offering various types of Chinese cuisine – for a night on the town he normally takes visiting clients from overseas into central Taipei. For those wishing to stay on the Neihu side of the river, however, there's the Miramar shopping mall and entertainment complex (technically in Dazhi) with its IMAX cinemas, department store, and 70-meter Ferris wheel that has become something of an icon for the district.

If it is weak on nightlife, Neihu makes up for it with its serene lake (with its distinctive sloping bridge) and many parks that appeal to cyclists and walkers. There is also hiking in the surrounding mountains, with paths leading to the Daoist Bi Shan Temple and the Zen Buddhist Jinlong Temple. “Bike-riding in the mountains is fantastic,” Jurling says. The hills are also home to recreational farms that offer strawberry and pomelo picking. Given the presence of both mountains and the waters of the Keelung river, Neihu residents regard the area's fengshui as auspicious.  

As Neihu and its environs emerge as Taipei's hottest area, the biggest loser in terms of residential property is Tianmu, which is suffering greatly because of the often-clogged traffic on ZhongShan North Road. Five or six years ago, Ke says, Tianmu was more expensive than Dazhi, but now the reverse is true. For commercial properties, says Wu of Jones Lang Lasalle, “the entire CBD is losing out” in the competition with Neihu.  

Despite that success, it is unclear whether Neihu will ever entirely surpass glamorous commercial areas such as the Xinyi District. Tang of the Taipei City Government would not welcome such a  development, in fact, saying the government prefers to see Xinyi remain as a commercial center, with Neihu as an industrial hub. “You need some industrial areas to support the growth of the city,” he says.

But long-term Neihu resident Alan Huang has a different idea. “In the future, Neihu could rival Xinyi,” he says. “We are at the turning point.”

AIT to Join the Neighborhood

Space, space, and more space is the reason the American Institute in Taiwan (AIT) decided to move to Neihu, says AIT spokesman Thomas Hodges. “It was the size of the space, the security of the space, and what we could do with it.”

A groundbreaking ceremony was held in June at the 6.5-hectare site on Jinhu Road, which has been leased from the Taiwan government for 99 years. Construction is expected to be completed in 2014 at an overall cost of more than US$170 million. “Our current facility is aging, inadequate and expensive to maintain,” says Hodges, “and we wanted to bring AIT’s different offices together in the one location.” Right now, various AIT facilities are scattered across Taipei. The main facility, which includes the consular section offering visa-issuance services, is located on Section 3 of XinYi Road, while the American Cultural Center and the Commercial Section are both in the Taipei World Trade Center’s International Trade Building, the Agricultural Trade Office is on RenAi Road, and the Chinese Language and Area Studies School is on Yangmingshan. Once the new building is ready, all the offices will be consolidated in one place for the first time.

Given the state of the world, says Hodges, U.S. missions now need to be built according to strict security standards. AIT, which represents U.S. interests in Taiwan in the absence of an embassy due to the lack of formal diplomatic ties, must comply with those standards, and various aspects of the Neihu site were well-suited to such concerns, such as the distance the structure will be set back from the street. 

Another advantage of the site is that it is within easy walking distance of a station on the Neihu MRT line. AIT, which first started planning to move in the mid-1990s, began very basic preparations for the site in March, such as rear-access road construction. The proposed 14,000-square-meter office building is still in the design stages. “It’s been a long process,” Hodges says.

Rough Start for New MRT Line

The new Neihu Mass Rapid Transit line, which opened in early July, may have great potential, but so far it is off to a disappointing start due to numerous glitches. A 14.8-kilometer extension to the existing 10.9-kilometer light-rail Muzha line, the Neihu line starts at the Zhongshan Junior High Station where the Muzha line leaves off, and runs through Neihu before ending up at the Nankang Software Park 12 stations later.

It is now possible – if the system is functioning properly – to travel from the Taipei City Zoo, the southernmost point of the Muzha line, to the Nankang Software Park in a 25.7-kilometer journey that takes around 40 minutes. The Neihu line cost NT$62 billion (US$1.9 billion) to build, and once start-up problems are solved, it should help ease traffic congestion and make it easier for the 100,000 or so tech workers employed in Neihu to get around. The line, which uses a driverless medium-capacity system, also links up MRT commuters with the Songshan Airport, which is one of the line’s two underground stations.

Many people living or working in Neihu praise the system for its convenience. “My transportation costs have gone down considerably,” says Neihu resident Jason Wang, co-chair of the AmCham Telecommunications Committee. But others complain that the cars are far too small for the masses of commuters wishing to travel to such an important commercial area. Each carriage is about four meters wide, and the narrow blue plastic seats can seat a maximum of 18 people per car. Chang Pei-yi, deputy director general of Taipei’s Department of Rapid Transit Systems, says each car can carry 122 people when standing commuters are included. With four cars per train, that makes a maximum train load of 488.

The time interval between trains on the Neihu line is two minutes and 15 seconds, but the city government hopes to gradually reduce the time between trains, bringing it down to one minute 12 seconds by 2023. The maximum load the system can currently carry in a day (one way from around 7 a.m. to 9 p.m.) is 170,000 people, Chang said. Currently demand clearly exceeds available space during peak hours.

The system has had considerable teething problems. According to a Taipei Times report on August 21, it had experienced 58 malfunctions or system breakdowns since beginning operations July 4. In part, this relates to problems of integrating the Neihu extension, which was built by Canadian engineering company Bombadier between 2003 and 2009, with the earlier Muzha line built by French company Matra.

Liu Hsiou-ling, a section chief in the urban planning division in the Taipei City Department of Urban Development, says the new Neihu line is only the beginning of the government’s plans to improve transportation conditions in Neihu. Eventually two additional MRT lines will be built – a North-South line passing through the Miramar complex to Donghu and another connecting Minsheng East Road with Xizhi. Draft plans have been submitted to the Cabinet, but no definite construction schedules have yet been set.

— By Jane Rickards