The capital city’s unemployment rate for the fourth quarter of 2017 dropped to the lowest in the country at 3.3% in November 2017. Dropping from 4.5% in September, to 3.8% in October, going below the provincial average of 4.8% and far below the national average of 5.9%.
This month the Victoria Real Estate Board released its report on Multiple Listing Service real estate activity in the Victoria area with a total of 462 properties sold in the Victoria Real Estate Board region this past December. This is a 1.9% slight decrease from December 2016 when 471 properties sold. A total of 8,944 properties sold over the course of 2017, 15.8% less than the 10,622 that sold in 2016. VREB President Ara Balabanian points out that while we did see evidence of a gradual return to a more balanced market, ongoing low inventory of properties for sale meant that buyers continued to experience competitive offer situations. There were 1,384 active listings for sale on the Multiple Listing Service at the end of December 2017, which is the lowest level of inventory for the area in the month of December since the statistic was tracked in 1996. The Home Price Index benchmark value for a single family home in the Victoria core in December of 2016 was $753,900. The benchmark value for the same home in December of 2017 was $823,800, showing an increase of 9.3%. Going forward, Balabanian expects to see more inventory come into the market, which will move us toward a more balanced state.
A project that has recently been approved is the Tapestry and a recently proposed project is 1400 Quadra Street. The Tapestry is a 15-storey, 173-unit mixed-use seniors rental and condominium residence with ground floor commercial space located at 701 Belleville Street, as reported by Citified. The rental and condo units will be mixed studio, one, or two bedrooms ranging from 376-1,198 square feet. In addition, there will be 3,806 square feet of ground floor commercial space that will front onto Belleville and Douglas streets. Construction started in 2017 and is expected to complete in 2019. 1400 Quadra Street is a proposal for a 118-unit, 15-storey purpose-built rental building on Quadra Street at the corner of Johnson Street. The rental units will range from one to three bedrooms, ranging in size from 420 to 1,023 square feet. The building will contain a single 2,799 square foot ground floor commercial space. Construction is to begin this year and complete in 2020.
It appears that 2017 was a fantastic year for the Victoria tourism industry, as reported by Chemistry Consulting. The growth in tourism is now putting significant pressure on wages and benefits in the industry, giving hope to the coming year. Victoria Conference Centre delegate days greatly increased to 9,459 in November 2017 from 3,832 in November 2016, a 147% increase. Average hotel occupancy numbers have shown a slight year-over-year decrease in recent months. The BC Ferries vehicle count slightly increased and the Victoria International Airport saw an increase in year-over-year passenger traffic.
The Greater Victoria Harbour Authority reports that Victoria welcomed 239 cruise ship calls in 2017, the largest number ever recorded in the city. The season started in April and goes through October, bringing close to 600,000 passengers and more than 236,000 crew to visit the capital city on cruise ships. During the 2017 season, GVHA welcomed the seven millionth cruise ship passenger to visit the city since the Ogden Point cruise terminal started as a cruise destination in 1978. In 2018, GVHA will be building an extended mooring dolphin to accommodate a brand-new cruise ship, scheduled for regular trips to Alaska from Victoria, beginning in June 2018.
Retail
Our Vacancy Statistics Report shows that the vacancy rate has dropped from 3.95% in the last quarter to 3.58%. A year ago, the rate in the fourth quarter was 4.64%. Sears at Hillside Mall and Canadian Tire on Douglas have not been included as they are not readily available on the market. According to a report by Statistics Canada, retailers in British Columbia saw sales increase 2.0% (seasonally adjusted) in October, the seventh increase in the previous eight months. Retail sales were 10.5% higher in October 2017 compared to October 2016. Anecdotally, the regions retailers were reporting a very successful Christmas season. The three to four percent vacancy range suggests a fairly balanced market, although on the horizon there are a number of projects noted below that may modestly increase the vacancy rate over the next year. The hi-tech sector is driving much of the demand for places to eat, drink, shop and exercise. There are now currently 12 residential/commercial projects under construction in the downtown area which will bring over 140,000 square feet of potential new retail space to the market. Almost 50,000 square feet of this space will be offered by Bluesky’s development at 1008 Pandora, 35,000 of which to be occupied by Save-On-Foods. Another 24,000 square feet will be brought on by Tenfold Projects, The Wade, on the corner of Pandora Avenue and Johnson Street.
No new significant changes on the development front from the last quarter. Construction of Ivanhoe Cambridge’s 100,000 square foot expansion of Mayfair Mall is still moving forward, with completion expected later this year. The Eagle Creek mixed development, adjacent to Victoria General Hospital, still has some spaces remaining ranging from 1,435 to 2,900 square feet. Omicron has received the go ahead from the Airport Authority and is busy with the proposed 100,000 square foot Gateway Shopping Centre in Sidney, with expected completion in spring 2019. The goal of the project is to offer a broader selection of retailers to keep customers shopping locally. The Colwood Corners development by Onni Group is underway, with Phase 1 to have eight buildings consisting of residential and about 153,000 square feet of retail and commercial space. Belmont Shopping Centre in Langford will be offering 200,000 square feet of retail space with completion of the first phase scheduled for July 2018. Rental rates on lower Government Street continue in the $50.00 to $60.00 psf/net annum range. There is only one reported vacancy on Lower Government Street. Interesting to note that in the boom times when rates were heading over $70.00 psf/annum there were four vacancies. The rents in the rest of the region are holding steady, with higher profile locations achieving $25.00 to $45.00 psf/annum.
Office
The office vacancy rate for December was down to 9.4% from 10.2% in the third quarter of 2017, which is the lowest we have seen since September 2012. This is expected to decline further as new supply coming to market won’t be available until later this year. In downtown Victoria, a large portion of the new Class A office space is already leased. The demand for Class A office space seems to be increasing, especially in the high-tech sector, however the upcoming leasing challenges for Class B and C spaces remain. It appears that we have absorbed about 150,000 square feet in this past year. The regions $4B+ tech sector remains a huge draw into the downtown scene, and continues to be an extremely valuable industry to this city. However, it is anticipated that the almost 500,000 square feet of new office space, to be occupied mostly by the Provincial Government in the next two years, will push the vacancy rate well into double digit territory.
Current projects underway include: 1515 Douglas which will phase in 270,000 square feet this year together with, 750 Pandora adding a further 177,986 square feet. Capital Park with 125,000 square feet is completed and Capital Park II, the second phase, will bring on 130,000 square feet that won’t be completed until next year. New suburban projects completed and in their leasing phase include the Tillicum Professional Building, which consists of three stories of office space with 11,000 square feet remaining for lease, and the new 76,000 sq.ft. office building at Eagle Creek Village adjacent to the Victoria General Hospital, which currently has 37,000 square feet left available. Face rates in new buildings are in the mid to high $20’s with effective rates $20.00 per square foot or less. Office rates in “B” and “C” buildings have steadied with some transactions still occurring at effective rents below $10.00 per square foot. General expectations for “B” space remain in the range of $12.00 to $17.00 psf / annum.
Warehouse
The warehouse vacancy rate in December has dropped significantly to 4.48% from 4.91% in the third quarter of 2017. The total regional vacancy is now about 426,000 square feet. More significantly, we show a drop in the number of available units from 61 to 52, a 15% drop in one reporting quarter. This continues to reflect a downward trend in the regions warehouse vacancy rates from a high of more than 8% last summer. The largest vacancy in the region continues to be the former Thrifty’s 91,000 square foot warehouse in Keating X, followed by the former CRD warehouse space of 58,645 square feet in Esquimalt. Activity has been across all sectors and generally reflects the strong level of prosperity in the local economy. Favorable commercial mortgage rates, in the 3% to 4% range, have encouraged many tenants to become owners.
Projects being marketed include Glenshire Business Park, which has approximately 12 one acre parcels remaining that can be combined for up to 7 acres at $27.00 psf/land. The new Sean Heights Business Park in Central Saanich is offering units for sale up to about 12,000 square feet at $240.00 psf/building. Leigh Road Business Park is completing and only four of the initial 14 units remain for sale. These units range from 1,970 square feet up to 2,331 square feet, and purchase prices ranging from $492,400 to $532,400 per unit. The Sooke Business Park is offering ¼ acre lots for $180,000. Lease rates for new, unsold, warehouse premises have steadied, in the range of $13.50 to $16.00 psf/annum. Market rents for existing stock are also holding steady and are typically in the asking range of $11.00 to $14.00 psf/annum.
