A stark comparison has emerged in the office markets of the capital cities of British Columbia and Alberta this year as much smaller Victoria punches above its weight in every comparative metric, including sales volume.
Due to the relative size of the office markets in each city, and the fact Victoria’s office market Is dominated by its downtown, this report compares all of Victoria – 8.8 million square feet of office space - with Edmonton’s downtown office market, which totals 18.4 million square feet.
Victoria’s office sector appears was relatively unscathed by the COVID-19 pandemic in the first half, with the vacancy rate inching up to 5.9 per cent, compared to 5.8 per cent in the same period in 2019, according to a report from Colliers International.
Edmonton, on the other hand, has seen its downtown vacancy rate rise to 15.8 per cent, up from 15.5 per cent in the second quarter of last year, JLL Canada reports in its Canada Investment Outlook Mid-Year 2020, released August 14.
In downtown Victoria, the current average lease rates for office space is now $27.30 per square foot, up nearly 8 per cent from a year earlier.
Edmonton has seen its downtown office lease rate drop to an average of $17.63 per square foot, the lowest level in 10 years.
For the entire first half of this year, office absorption (the sale or lease of space minus space returned to the market) is down in both capitals, but it dropped by 32,000 square feet in Victoria, while Edmonton saw downtown absorption go negative by 98,000 square feet.
Sublease availability increased by 45,000 square feet in downtown Edmonton this year, and “the sublease vacancy is expected to grow over the rest of the year after tenants re-assess their space needs,” JLL noted.
Victoria had no sublease space come to the market this year.
Victoria also currently has 139,000 square feet of new office space under construction and another 419,000 square feet in the in the works, mostly due to the new regional Telus headquarters planned for downtown .
Edmonton has no office space under construction this year, either downtown or in its suburban markets.
Government leasing is important in both office markets, but it is dominant in Victoria where the provincial government is responsible for half the office space in the city. This year, the B.C. government had vacated 80,000 square feet but has taken up 184,000 square feet in one new Victoria office building and preleased 35,000 square feet at a second new complex.
In Edmonton, where government leases make up less than 25 per cent of the total downtown office space, government absorption has gone negative by about 40,000 square feet so far in 2020.
For the first half of 2020 the Greater Victoria market had 11 office transactions totaling $19.1 million in sales volume, according to Colliers’s Victoria office, which is considered a stellar performance.
Edmonton had two office sales close in the second half of 2020, but both closed in January and were actually 2019 sales. The two sales totalled $14.5 million, reports JLL Canada, which only tracks office building transactions worth $5 million or more.
However, Edmonton office sales in the second half of 2019 hit $517 million, an indication that. when Alberta’s capital is up to speed, it would leave smaller Victoria in the dust.