After years of watching the economic downturn through a proverbial rear-view mirror, Victorians are now fixed on the view ahead.

Downtown Victoria’s 2010 office vacancy rate has increased from 4% to 6.1%, according to a report by Colliers International’s Victoria office.  The regional vacancy rate rose by 1.9% to 6.3%.

Colliers reports that 330,000 sq. ft. of new office space will be added to the region throughout 2010 with projects such as Atrium at 800 Yates Street, 947 Fort and offices at the new Uptown development in Saanich.  However, the record new supply of space coupled with provincial government downsizing will result in vacancy rates at nearly double 2009’s rate and approximately 3% above the 10-year average.

Downtown's newest office building, Atrium, is nearing the end of construction. Photo © by VibrantVictoria.ca.

Just a few years ago the office market in Victoria was a different story.  The region was readying for a major influx of office properties as the economy, fueled by private-sector investment and a relatively stable provincial government financial outlook, roared ahead.

Multiple large-scale projects were proposed that combined, would have padded downtown Victoria’s office space by nearly half a million square feet.  Unfortunately the economic slowdown of 2008, coupled with a red-hot provincial government-agenda-turned-layoff-spritz  quickly put a stop to multiple projects.

The victims included The Radius, once planned as a 13-storey office and 17-storey residential complex along Chatham Street between Douglas and Blanshard streets, which actually managed to secure commercial tenants before financing dried up.  And just south of Radius the 15-storey Gateway Green development by Tri-Eagle Development Corporation failed to materialize as a major tenant never signed on.  Gateway Green, however, remains a proposal.

Across downtown at Douglas and Courtney streets Westbank Development Corporation partnered with the St. Andrew’s Church to redevelop the church’s Kirk Hall property along Courtney Street and Westbank’s Ballantyne property along Douglas Street.  Ultimately both partners cut ties and at one point each had a mid-rise office proposal in the works (the Kirk Hall property was envisioned as a 10-storey project).

In the 700-block of Yates Street, Concert Properties recently canceled plans for a 12-storey office building and instead is focusing on a 16-storey residential toweer, citing market economics as the driver behind the switch.

High vacancy rates do not necessarily equate to all-around negatives for the region.  For office tenants, increased vacancy rates translate into landlord concessions as the market reacts to decreased demand.  Coupled with more choices for tenants, the perfect opportunity for local organizations to move up to new digs or re-negotiate lease contracts is on the horizon.

For more on the Victoria office market and to discuss issues related to the topic, refer to VibrantVictoria’s Office space and office development discussion thread.

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