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Victoria industrial market tightest, priciest in Canada

B.C.'s capital has the lowest vacancies and most expensive industrial real estate in the country and only Vancouver and Toronto edge it in the office sector
Colwood rendering
Vancouver-based PC Urban Properties is building 135,000 square feet of industrial property on the Island Highway in Greater Victoria. | PC Urban

Victoria has one of the smallest commercial real estate footprints among major Canadian cities but it kicks far above its weight in the metrics that define a market giant.

With a 0.2 per cent vacancy rate, B.C.’s capital city has the tightest industrial sector in the country and, at $16.02 per square foot, Canada’s highest average industrial lease rates.

Second-place Metro Vancouver, in comparison, had a 0.5 per cent industrial vacancy rate in the third quarter and an average per-square-foot leases at $15.50, according to a recent national survey by Colliers Canada.

Across Canada, 1.5 per cent of industrial space is vacant and the average lease rate is $9.70 per square foot.

Noting that close to 300,000 square feet of new industrial space is currently under construction in Victoria, Colliers said it may not be enough. “The demand for industrial space continues to outpace supply significantly,” its report noted.

To meet demand for strata industrial space, Vancouver-based PC Urban Properties is building a 135,000-square-foot property on the Island Highway at Colwood.

“There has been a limited amount of industrial strata development in Greater Victoria in the last decade,” noted CBRE senior vice-president Ross Marshall.

Office sector

In the office market, Victoria has a 7.3 per cent vacancy rate and average office leases at $23.25 per square foot, trailing only Toronto and Vancouver in both categories.

The average office vacancy rate in Canada is now 15.7 per cent, the highest since 1994, according to commercial agency CBRE.

In its first report on the Victoria office market, covering the third-quarter 2021, CBRE noted that Class A and AA space in Victoria has seen the vacancy rate fall to 4.6 per cent, while lease costs levelled at $26.49 square foot for the top-tier offices.

Currently, less than 250,000 square feet of new office space is under construction in Victoria, most aimed at completion by 2023, but 40 per cent of the space has already been pre-leased and most of the new buildings are in suburban Esquimalt and Langford.

In the downtown, the largest office space underway is the 75,390 square feet in the mixed-use makeover of the old Times Colonist press building, which completes late next year. About 63 per cent of that office space has already been committed, according to developer David Fullbrook, CEO of Merchant House Capital.

By 2024, the new Telus Ocean tower downtown is expected to deliver 150,000 square feet of office space and Jawl Development is planning to reconfigure the existing Capital 6 theatre site into a nine-storey downtown tower with 105,000 square feet of offices, but neither project has achieved city approval.