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Victoria's commercial real estate market turns bullish

CBRE outlook report highlights strong demand, below-average availability rates

Optimism has returned to Victoria’s commercial real estate market, according to a new market outlook released this week by commercial real estate company CBRE Ltd.

The outlook covered the prospects for industrial, office and retail real estate as well as multi-family residential development. It suggests there is plenty of demand in Greater Victoria, B.C,.across all sectors.

The outlook noted the region's industrial sector is limited only by available land. Development underway this year should result in an additional 220,000 square feet of space. But the lack of land is expected to drive up the sale price of industrial land to $400 per square foot, while the availability rate is expected to drop to below one per cent from 1.7 per cent last year.

The report notes the region's industrial availability rate is below the national average, despite new facilities such as the Western Speedway redevelopment in Langford and Amazon’s facility near Victoria International Airport.

“The market is effectively out of industrial-zoned parcels,” the report said. “Developers who are able to move forward will see their projects well received by the market.”

Throughout the pandemic, Victoria’s office space has remained fairly stable, according to the report, and 2022 will start to see the vacancy rate drop as workers return to downtown office space. “Victoria’s office market has remained stable with a heavy government presence and an active tech sector,” the report said. “Capitalizing on historically low interest rates, some users have started seeking space to purchase versus lease.”

The outlook suggests the Plexxis Tower being built in Langford is a prime example of this as is the recently approved Telus Ocean building, slated for downtown Victoria.

The office vacancy rate is expected to drop to 5.7 per cent this year from 6.5 per cent last year, while rental rates will climb to $29.75 per square foot, from $28.20 last year for Class A space.

The outlook also suggests there are rosier days ahead as the retail sector returns to normal.

“The slowdown of tourism and activity in the downtown core has been impacting retailers and reshaping the main shopping districts, including Old Town and Government Street, causing family-owned store closures,” it said. “The easing of pandemic-related restrictions has renewed optimism for the sector, however. The Coho ferry resumption of service in late 2021 as well as the hopeful return of cruise ships to the Island are set to see tourism breathe life into the downtown core once again in the year ahead.”

The outlook said more people moving to the region from other provinces has added to the heavy demand on multi-family housing.

“Despite the current projects under construction, Victoria’s residential market is anticipated to remain under supplied,” it said, adding the vacancy rate is forecast to remain steady at about one per cent; the average rent for a two-bedroom condo could rise to $1,665 per month from an average of $1,571 last year.

Nationally, commercial real estate investment transactions in Canada are expected to hit an all-time high of $58.5 billion in 2022. The activity builds off last year’s momentum, when a record $57.9 billion of investment took place due in part to the availability of capital.