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[Galvanized]

DOWNTOWN VICTORIA OFFICE SPACE SQUEEZE

Jan 17, 2007

THE LOCAL COMMERCIAL REAL ESTATE MARKET IS SEEING OCCUPANCY IN JUST ABOUT EVERY RENTAL SPACE AVAILABLE -- BUT IS BEING HELD BACK BY SEVERAL FACTORS, ACCORDING TO AN INDUSTRY LEADER.

COLLIERS INTERNATIONAL SAYS DOWNTOWN PRIME OFFICE SPACE IS AT A 0% VACANCY RATE -- WITH REGIONAL INDUSTRIAL SPACE AT 0.3% VACANCY.

MANAGING DIRECTOR ANDREW TURNER SAYS THERE'S A CRITICAL SHORTAGE OF LAND -- BUT HE'S CONFIDENT THERE WILL EVENTUALLY BE MORE ROOM IN THE MARKET.

"THE DYNAMICS OF SUPPLY AND DEMAND SHOULD DICTATE THAT SUPPLY WILL INCREASE TO MEET THAT DEMAND," TURNER SAYS. "ONE OF THE PROBLEMS THAT WE HAVE IS THE COSTS OF CONSTRUCTION HAVE INCREASED SO DRAMATICALLY THAT THOSE ECONOMIC RENTS THAT ARE NECESSARY FOR NEW BUILDINGS TO BE BUILT ARE, RIGHT NOW, NOT ATTAINABLE."

TURNER SAYS THE CITY SHOULD CONSIDER ALLOWING MORE DENSITY DOWNTOWN -- AND SHOULD MAKE THE RE-ZONING AND DEVELOPMENT PERMIT PROCESS LESS CUMBERSOME.

"WHEN YOU'RE GOING FOR REZONINGS, IT DOES TAKE A GREAT DEAL OF TIME TO GO THROUGH THE CITY PROCESSES TO GET THE DEVELOPMENT PERMITS THAT YOU'RE REQUIRED," TURNER SAYS.

"ONE OF THE PROBLEMS IS THE SCARCITY OF LAND THAT WE HAVE IN VICTORIA," TURNER ADDS. "THERE IS A SOLUTION TO THAT. THE CITY DOES HAVE SOME CONTROL OVER THE DENSITY THAT IS ALLOWED ON A SITE. THERE IS PLENTY OF SPACE HERE IF THERE'S ENOUGH DENSITY."

"TALLER BUILDINGS ARE PROBABLY SOMETHING THAT WE'RE GOING TO SEE MORE OF IN THE FUTURE," HE SAYS. "THAT IS ONE OF THE SOLUTIONS TO THE PROBLEM."

- IRELAND CFAX 1070

[D.L.]

city hall needs to be beaten over the head with that article.

[G-Man]

There is a great article in the TC today that says the same thing about office space but it is locked. Also talks about condos and how while house sales are falling flat condos are still being sold at a good pace.

[m0nkyman]

Real estate 'to flatten'
But economist says the trend for 2007 isn't necessarily bad

Carla Wilson, Times Colonist
Published: Thursday, January 18, 2007

Residential real estate prices are expected to rise by single digits in 2007 and possibly flatten out later this year, says the B.C. Real Estate Association's chief economist.

"That's not necessarily a bad thing for homeowners, who have experienced a big increase in equity over the last several years," Cameron Muir said from Vancouver. Homes will hold their value, while buyers will not face such large month-over-month price increases and the feeling of being rushed to get into the market as in the past.

Muir was scheduled as one of the keynote speakers at the Canadian Home Builders' Association's annual Crystal Ball Session last night.

Meanwhile, Colliers International released its annual report on the region's office vacancy rate, stating that inventories remain so low that the Victoria office market has reached a "crisis."

Predictions for the coming year give us a similar refrain to that of 2006, with the commercial and residential sectors dealing with high costs for land and materials, as well as a shortage of skilled trades workers to put up buildings.

Muir joins others who expect the real estate market to become more balanced. Price growth moderated last year. But the overall drivers of the housing market are all there: strong job growth, near-record low unemployment rates, and positive migration internationally and nationally, he said.

As for mortgages, interest rates should stay fairly flat in 2007 as well, he said. The Bank of Canada announced Tuesday it is keeping the key interest rate steady at 4.25 per cent.

The negative side is what Muir calls the affordability squeeze, because some potential buyers can not afford today's prices. The average price of a single-family house in Greater Victoria last year rose 12.5 per cent to $521,460.

In larger markets, particularly Victoria and Vancouver, first-time buyers are increasingly moving towards multi-family homes because they are more affordable, Muir said. Last year, the average price for a condominium in this region was $286,058.

Condominium developments in Victoria and Vancouver are going up to meet strong demand. For example, in Vancouver between 120 and 130 completed condo units are not sold. That compares with the year 2000, when about 2,700 units were unsold, he said.

But developers are facing "capacity restraints" limiting their ability to increase the number of units built because of issues such as skilled-trade shortages, high land costs, and bottlenecks in government approval processes, Muir said.

Casey Edge, executive officer of the Victoria office of the Canadian Homebuilders' Association, with 180 members, is hoping that the province will impose minimum educational requirements this fall for residential builders.

To be licensed as a residential builder now, the only real essential is to be covered by a warranty company, he said. It makes sense to have required education standards because specialized skills and knowledge are needed, especially with as regulations are brought in.

When it comes to office vacancies, downtown Victoria is at zero for top-quality space, Colliers' market report for Victoria said.
f space could be found, the gross rent including operating costs would reach $33 to $38, Colliers leasing agent Robert Law said yesterday. That is an increase of about $5 per square foot in the past year. Prices for new office space will be even higher.

Allowing greater density on land would make it more financially viable for new office construction, he said.

Greater Victoria's overall vacancy rate dropped to four per cent in 2006 from 5.9 per cent the previous year, the lowest since 1995. "Market demand is continuing to eat into existing supply, driving vacancy rates down and rental rates up," the report said.

The overall vacancy rate is expected to drop into the three per cent range by late this year, pushing rental rates up higher, the report said.
© Times Colonist (Victoria) 2007

[G-Man]

Thanks for posting that Monkey!

The bolded item seems quite similar to what was said in the CFAX report. Well we may know by the end of today what the vision for the city requires. I hope I can get a copy of the CotW report booklet.

When it comes to office vacancies, downtown Victoria is at zero for top-quality space, Colliers' market report for Victoria said.
f space could be found, the gross rent including operating costs would reach $33 to $38, Colliers leasing agent Robert Law said yesterday. That is an increase of about $5 per square foot in the past year. Prices for new office space will be even higher.

Allowing greater density on land would make it more financially viable for new office construction, he said.

[Mike K.]

I heard the magic number for building new space downtown had to be $30 or above. Two years ago the number was hovering at around $20 and developers were saying no way, and were wondering if the price would every breach $30.

Well, here we are, so get ready for brand new class-a office development in Victoria :tup:

[aastra]

"ONE OF THE PROBLEMS IS THE SCARCITY OF LAND THAT WE HAVE IN VICTORIA," TURNER ADDS.

Good gravy, there's no scarcity! There are still PLENTY of large surface parking lots! Hey, ever heard of the Bambu site? Or the Janion Building? Or Centennial Square? Does Rock Bay ring a bell? How about the Telus block? Or the big parking lot on Broughton? Or the other parking lot behind the Royal Theatre? Wharf Street? Parking lots in James Bay? The flatiron lot beside Aria?

WHY DOES EVERYBODY SEEM TO REGARD ALL OF THESE SPACES AS OFF LIMITS???

So if we reduced the official definition of downtown to a single block would that mean downtown Victoria was built out?

These people can't see reality through the regulations.

[G-Man]

Well the Coriolis report addresses this you will see.

[Ms. B. Havin]

Did somebody already post this article, which appeared in Tuesday's T-C: [url=http://www.canada.com/victoriatimescolonist/news/business/story.html?id=01b123a0-c2a3-404e-9b16-fc63e1ecd7cb:886e4]There's no end in sight for city's non-residential building boom[/url:886e4], by Carla Wilson (Jan.16/07)? Sorry if it's already up -- there have been several articles lately that seem to repeat the same thing with slight variations, I'm losing track! :?

[G-Man]

6 posts up the page.

[Ms. B. Havin]

Ah, thanks!

[Galvanized]

Check out the CFAX poll in regards to this. http://cfax1070.com/polls.php

[Mike K.]

Thanks for that link. Get a load of the "no" choice:

No. You don't let the cyclical whims of the market dictate the public's standards

Better yet, that option might as well have read: No. I do not care to support economic growth or economic investment in the City of Victoria. Take it out to Langford!

...but what the heck does their "no" statement actually mean? That in Victoria the market should not respond to the laws of supply and demand but should act on the whims of the publics standards? Sounds like acting on the whims of the publics standards equates to not building office space!

[G-Man]

Both choices suggest that you have to "accept" taller buildings not that you can embrace them if well designed!

[renthefinn]

Well undeveloped lands are off-limits for development. They should be designated for urban parks for the blind people, and other less fortunate people in the city. Heck we should start a city funded sign language program for deaf people there. Or a visual arts program for the quadrilapegics (sp?) and of course safe injection sites for our thieves and prostitutes. Throw in a drop in centre for underprivalaged youths and mentally unstable folks, and we could have a winner (btw I have a mentally unstable relative, so there!)

[aastra]

The naysayers griped about new condo construction because they claimed it was preventing new office construction.

Now the naysayers are griping about potential new office construction.

Methinks the naysayers just like to gripe.

[Holden West]

BC's natural gas business is back in local hands after Fortis bought Terasen's gas holdings. So will that mean the Terasen building at Douglas and Fisgard will be renamed again (it was originally the Centra Gas building)?

http://www.theglobea... ... hColumbia/

[G-Man]

JJ Barnicke is moving their office into the Quadra Building Retail space next to BCAA. Too bad as I was hoping that a restaurant would move in there. Still good that they will be adding to the area!

[Mike K.]

Great. Their current digs are comprised of a shack at Oak Bay junction.

[Icebergalley]

It's isn't Class A, but it is deceptevely large and comfortable...