Low prices, higher cap rates draw developers to Vancouver Island

Vancouver’s Onni Group has started work on its mixed-use Colwood Corners development in the Greater Victoria region: 152,000 square feet of retail in the first phase | Submitted

A Vancouver development company is making its first investments in Nanaimo, joining other Lower Mainland firms that have been building on the Island as land values and demand rise in one of B.C.’s hottest real estate markets. 

Wertman Development Corp. has bought two Nanaimo sites – one for a downtown condo tower of 20-plus storeys and another for a two-building rental project.

“As far as acquiring land to develop in Vancouver, [it] is next to impossible to find anything that is affordable,” said Jason Wertman, vice-president of Vancouver’s Wertman Development. “We’re running out of room in [Vancouver] for people to acquire and to move to.”

That is why the 55-year-old firm started looking at Vancouver Island, buying two neighbouring Nanaimo parking lots – one close to the water, and the other site near Vancouver Island University.

Concept drawings are in the works, with the height possibly between 22 and 25 storeys. Plans call for about four to six suites per floor, mainly two-bedroom units.

For the commercial space, Wertman is thinking “maybe a restaurant or a grocery store to serve the neighbourhood.”

“We’re quite confident that the city is in a growth period,” Wertman said.

The family company isn’t alone in recognizing the Island’s potential, delegates to the annual Colliers International real estate outlook conference were told February 15 in Victoria.

Brad Archibald, a Colliers associate vice-president, said a migration of both homebuyers and investors from the Lower Mainland has driven Nanaimo-area land demand to the highest level in 10 years. “We are seeing historically high housing sales,” he added. 

In the multi-family sector, Nanaimo apartment buildings are selling for $250,000 per door, he said, while the city’s industrial vacancy rate is near zero. 

Greater Victoria 

Bosa Developments, Chard Development, Concert Properties, Element Lifestyle Retirement, Omicron and Onni Group are among Vancouver-based developers now active from Nanaimo to Victoria.

Bosa has sold out its 17-storey Encore condo project that completes this year as part of the Bayview development in downtown Victoria. Bosa is also building a residential rental complex on Pandora Street.

Work is underway for a $75 million seniors residence, also on the Bayview site, where Vancouver’s Element Lifestyle Retirement is building a 153,000-square-foot seniors’ facility that will have five storeys and feature 155 units made up of 50 condos, 70 rentals and 35 licensed care units.

In Colwood, near Victoria, Onni was issued preliminary building permits in January to start its Colwood Corners mixed-use project. 

Covering about 12.5 acres, the phased project includes retail development and a number of multi-family units. London Drugs and Coast Capital Savings are already in place on the site, which is next to Royal Roads University. 

Onni has started site work and expects completion of the first phase by 2020, which will include three mid-rise residential buildings and 152,000 square feet of commercial space, housing four anchor tenants.

Kang and Gill Construction, a local developer, is starting a four-storey condo-retail development, Cordova Bay Plaza, in Saanich.

Vancouver’s Omicron has called for tenders for the construction of Sidney Crossing, a $35 million, 100,000-square-foot shopping centre near the Victoria International Airport. The Vancouver developer received development approval from the Victoria Airport Authority last year and has been working with the Town of Sidney on the project.

Construction on the 10-acre site is now expected to start this summer and completion is slated for spring 2019. The pedestrian-oriented, open-concept shopping centre will include 10 buildings housing a national grocery store chain, said to already be leased, pharmacy, retail stores, medical services, restaurants and other retail and service outlets.

Meanwhile, Merchant House Capital is planning a mixed-use makeover of the offices of the Victoria Times Colonist newspaper in Victoria, which it purchased last year. Renovation of the building is expected to start late this year, and the residential component could start in 2021.  The renovation will include street-level retail and 120,000 square feet of office space, according to early concepts. 

Victoria’s retail market is expanding, fuelled by increased tourism and a growing tech sector that is drawing a lot of young consumers into the city, the outlook conference was told. The giant Mayfair mall is undergoing a renovation as shopping centre vacancy rates have dipped to 4.3 per cent. 

The downtown retail vacancy rate is now 3.8 per cent due to the increase in people living in the core, noted Colliers retail specialist and senior associate Matt Fraleigh.

“The retail sector is on fire,” he said.

About 400,000 square feet of new Class A space is underway in downtown Victoria, said Colliers vice-president Tristan Spark, who noted the downtown office vacancy rate is now around 7.1 per cent. “With more inventory to be delivered, the downtown office vacancy rate will continue to rise,” Spark cautioned.

The multi-family market continues white-hot in a city with a vacancy rate of 0.7 per cent. In 2017, sales volume for rental apartment buildings was $146 million, up from $127 million a year earlier. 

The average per-door price for mostly older apartment buildings is $215,100, yet the average capitalization rate is just over 4 per cent, up slightly from a year ago.

A number of new rental units – about 2,000 – are under construction and another 4,000 units are in the pipeline, which could raise the vacancy rate modestly over the next three years, Colliers noted.


One sector often overlooked in Victoria is the industrial real estate market, said Ty Whittaker, senior vice-president of Colliers Victoria. But, he said, it is one of the strongest sectors in the capital region.

“The continued expansion of technology, shipyards and container companies can be seen by the positive leasing activity,” Whittaker said. 

With industrial absorption hitting a five-year high of 281,000 square feet in 2017, “we are in an unbalanced market with demand strongly outweighing supply,” Whittaker said. 

Greater Victoria has about 10 million square feet of industrial space and the overall industrial vacancy rate is now 2.8 per cent, but it falls below 1 per cent in the city, he said.

Industrial lease rates are pushing above $12 per square foot and flirting with a record-high $16 per square foot at some new sites, Whittaker added.

Total industrial transactions reached $17 million in 2017, with a recent one-acre industrial parcel selling for $1.5 million. Industrial strata space is selling in the $189 per square foot range.

A notable sales transaction was in the Sean Heights Business Park in Saanich, where 19,660 square feet recently sold for $3.7 million. About 30,000 square feet of space is being added at that park, which will be needed as the Saanich market is seeing a tight industrial vacancy and the highest absorption in the region. 

Whittaker pointed to the Westshore, where Victoria Shipyards is expanding, as perhaps the top industrial area for 2018.  But, as with most sectors, values for Greater Victoria’s scarce industrial-ready land are quickly rising, he said. 

With files from the Times Colonist

Western Investor