Jawl, for its part, saw 1112 Fort Street offering long-term value to its portfolio when it struck a deal with BC Ferry Services for the 35-year-old property and closed the deal in 2010 for $11 million.
"We purchased it with an eye to expanding our footprint of high-quality office product within Victoria," said Robert Jawl, who led acquisition efforts on behalf of family-owned Jawl. "The building presented a good opportunity to do a fairly full-scale renovation and upgrade to bring that building a notch or two higher in terms of its quality position."
In addition to Procura, which occupies 8,600 square feet (or about 20 per cent of the building, with an option on an additional 8,600 square feet), Elections BC has leased half the 52,957-square-foot property.
The circumstances of 1112 Fort Street aren't unlike those of other properties in downtown Victoria.
Retrofits
Another example is the Dogwood building at 1019 Wharf Street, a 60,000-square-foot property formerly occupied by government offices. Christopher Developments Inc. is renovating the property, including seismic upgrades, and the Victoria office of Colliers is seeking tenants.
Dave Ganong, managing director for Colliers in Victoria, touts it as the only waterfront office space available in Victoria right now. He expects the property to be leased up within the year. Demand for space has strengthened as the economy recovers. Ganong notes that 70 per cent of the 300,000 square feet of new class-A product completed last year has been absorbed.
BC Ferry Services pre-leased space at 800 Yates Street, which Jawl completed last year, and BC Land Titles also took space in the building. A new, 50,000-square-foot development at 947 Fort Street also leased to a variety of government and private-sector tenants.
This has helped turn attention to the suburbs, where properties such as Morguard Investments Ltd.'s redevelopment of Uptown (the former Town & Country Shopping Centre in Saanich) is attracting tenants, including Plenty, a Vancouver boutique, Best Buy, Future Shop, Mexx and others.
Uptown
"If you're looking for new office space in the city, Uptown is your primary option right now," Ganong said.
A key element in the dynamic is one of the traditional factors of Victoria's commercial real estate market: the provincial government. A key user of space as well as a magnet for aspiring new companies and new residents, government has aggressively reviewed its space requirements in recent years as well as the kind of space it occupies. Consolidation of provincial offices and a mandate to secure environment-friendly space as leases come up have sent a clear message to Victoria landlords over the past three years.
Ganong foresees increased government office demand as Premier Christy Clark puts her stamp on government and the post-Gordon Campbell era takes shape.
"They've been in a retrenching mode for the past couple of years, and the sense that I get is that within the next 12 months you're going to start to see a little more activity," Ganong said.
In the meantime, many companies are joining Jawl in purchasing properties that offer good long-term value in a relatively stable market. Toronto-based Whiterock REIT picked up Gateway Park, a 181,000-square-foot office property on Keating Cross Road, in May for $31.9 million. The transaction was significant, at nearly three times the value of Jawl's deal for 1112 Fort Street.
Meanwhile, in Sooke, 37 kilometres west of the capital, Partners Real Estate Investment Trust of Victoria has bought the 88,200-square-foot Evergreen Shopping Centre for $15.8 million.
Bamberton
While office tenants looked to the suburbs for cheaper, better-quality space beyond downtown, the same is true for industrial clients facing the makeover of established industrial areas in Greater Victoria.
"Victoria's industrial waterfront is being gentrified a little bit, so there's some desire to move some of those uses out of the downtown area," said Ross Tennant, development manager for Bamberton Properties LLP, which is working with Three Point Properties Ltd. of Victoria to redevelop the Bamberton lands just across Saanich Inlet from the Victoria area. Bamberton's 1,550 acres were formerly home to a major cement plant. Three Point acquired the site in 2005 and completed remediation work before filing a rezoning application for a 3,500-unit residential development on the site in June 2007.
Industrial
The biggest drivers of Victoria's industrial market at present, according to Colliers vice-president Ty Whittaker, are owner-users and tech companies.
Mid-year 2011 statistics indicate that industrial vacancies are running at 3.4 per cent, down marginally from 3.7 per cent in December 2010. Victoria usually sees 169,900 square feet of new industrial space built each year, but 2010 saw just 42,500 square feet completed - a trend that's continued this year. At the same time, net absorption - typically 185,000 square feet a year - was just 62,383 square feet.
"I'm finding there's limited depth in our leasing market," Whittaker said, but added: "Our high-tech market is very healthy and strong. There are a number of locally born-and-bred companies that are continuing to expand and do very well on both a regional, national and global basis."
These include StarFish Product Engineering Inc., Redlen Technologies, ASL Environmental Sciences Inc. and AXYS Group Ltd. - companies active in the life sciences and environmental field.
The other bright point has come from federal infrastructure funding, especially for naval contracts.
Residential
Victoria's once-white-hot housing market has cooled with sales and prices down and inventory rising to more than 5,000 homes on the market this summer, a 14 per cent increase from a year earlier.
As of July, the average condo price had dropped to $315,371, down from a six-month average of $327,762, while the average detached house price had fallen by about 5 per cent to just over $581,000.
from Western Investor September 2011