Greater Victoria is facing the tightest office market in a decade as the provincial government becomes a major factor in the market.
The province has leased more than 200,000 square feet of new and existing space in the past year and is looking for more.
“The province is back,” said Tristan Spark, vice-president of Colliers International in Victoria.
Spark noted that when the BC Liberals were in power they virtually stopped leasing office space in the capital region and even began selling excess property. But the BC NDP government has stepped back into office leasing in a big way.
The provincial government leased the entire 125,000-square-foot first phase of Jawl Development’s new Capital Park office project in James Bay and claimed 70% of Phase 2 of the project, taking an additional 91,000 square feet of the Class AA space.
The province has also leased about 20,000 square feet of existing office space over the past six months.
“There’s a new driver in the economy that we haven’t had in the last 16 years. The [provincial] NDP are out there leasing space,” said Spark.
The government has plans to absorb office space to accommodate new agencies to study the effects of climate change, and to house the bureaucracy regulating cannabis, Spark said.
Colliers International’s third-quarter Greater Victoria office market report shows the region’s vacancy rate has dropped to 5%, down from 8.2% in the first half of 2018.
The last time the vacancy rate was this low was in 2009, when it hit 4.5%, the report noted.
“It’s exciting, but a little frightening,” Spark said. “We are running out of space, even with the new space coming on the market.”
Tenants looking for offices are already beginning to face a lack of options, and office rental rates are experiencing upward pressure, Spark said. He added that the high-tech sector is also leasing office space but that the province is now a substantial player in the sector.
The average rental price per square foot around the region is $27.50, an increase of 7.8% compared with last year at this time. Class AA space, such as at Capital Park, leases for more than $32 per square foot.
About 270,000 square feet of new offices are in the pipeline. Spark said some of that future development will be on the West Shore, with 40,000 square feet planned, and as much as 140,000 square feet being considered for a six-storey building as part of a Crombie Real Estate Investment Trust development in Langford, which Spark said is expected to be the first strata office development in the region.
The province is already looking for such suburban office space, he added. •
– With files from the Times Colonist