Land and Development

Office Space

Strong demand and a limited supply of quality office space in Greater Victoria continued to put downward pressure on vacancy rates in the second half of 2008. The vacancy rate for Downtown Class A property was just 2% and lease rates have increased.

There are currently 345,000 square feet (sf) of office space under construction, most of which will not be available until 2010 at the earliest (according to the 2008 Colliers International Office Market Report).

Trends in office space vacancy and lease rates are indicative of growth or decline in the business community.

The total inventory of office space is somewhat less responsive to short run changes due to the time and investment required to construct new space.

Office Space

Q2-06

Q4-06

Q2-07

Q4-07

Q2-08

Q4-08

Change Q4-07 to Q4-08

Inventory (sf)

7,867,884

7,891,939

7.981,612

8,034,845

7,976,050

7,990,371

-1%

Vacant Space (sf)

384,396

315,911

264,741

234,629

184,001

198,962

-15%

Vacancy Rate

4.9%

4.0%

5.9%

2.9%

2.3%

2.5%

-0.4 pp

Net Absorption (sf)

56,865

145,026

151,170

211,926

43,769

19,808

-91%

Net New Supply (sf)

-20,607

12,878

100,000

130,664

-35,499

-20,499

-116%

Average Class A Lease Rate (per sf)

n/a

$20

n/a

$22

n/a

$24

9%
Source: Colliers International, Office Market Reports. Note "sf" is square feet.

Industrial Space

Vacancy rates for industrial space remained below 1% in 2008 in Greater Victoria. Strong demand for the limited space has continued to put upward pressure on both lease rates and land prices.

New space tends to be provided on a build-to-suit basis so net absorption is closely related to net new supply. As a result, low vacancy rates and increasing lease rates are expected to continue in 2009.

The market for industrial space reflects the performance of manufacturing, transportation and distribution, service commercial and similar business activities.

Lack of space can discourage or limit expansion of certain types of industrial businesses.

Industrial Space

2003

2004

2005

2006

2007

2008

Change 07 to 08

Change 03 to 08

Inventory (sf)

7,293,828

7,346,828

7,408,608

7,606,819

7,661,819

8,036,975

5%

10%

Vacant Space (sf)

227,688

91,174

30,083

21,562

16,337

55,202

238%

-76%

Vacancy Rate

3.1%

1.2%

0.4%

0.3%

0.2%

0.7%

0.5 pp

-2.4 pp

Net Absorption (sf)

148,409

184,808

126,999

251,214

60,225

336,291

458%

127%

Net New Supply (sf)

151,261

53,000

61,780

198,211

55,000

375,156

582%

148%

Lease Rates (per sf)

$7.75

$8.00

$8.50

$9.00

$12.00

$14.00

17%

81%

Land Costs (per sf)

$14.00

$16.00

$20.00

$25.00

$30.00

$30.00

0%

114%
Source: Colliers International Industrial Market Reports. Note "sf" is square feet.

Retail Space

The Greater Victoria retail market continued to be strong in 2008. The Downtown streetfront vacancy rate hit a record low of 2.7% (according to Colliers International) while the shopping centre vacancy rate remained at exactly 1.1% for the fourth consecutive year.

Low vacancies continued to put upward pressure on lease rates and total occupancy costs rose by up to 4% between 2007 and 2008.

Retail space occupancy and lease rates are closely associated with the overall state of the economy. When the economy is healthy and incomes are growing, there is more retail spending. The opposite is true when the economy is more unstable or shrinking.

Retail Space

Vacancy Rates

Occupancy Costs per Square Foot

2006

2007

2008

Change 07-08

2006

2007

2008

Change 07-08

Regional Shopping Centres

0.5%

0.1%

0.9%

0.8 pp

$66.49

$67.31

$69.80

3.7%

Community Shopping Centres

2.8%

2.1%

2.2%

0.1 pp

$38.14

$39.67

$39.85

0.5%

Neighbourhood Shopping Centres

0.5%

1.0%

0.7%

-0.3 pp

$28.01

$28.29

$29.52

4.3%

Convenience Shopping Centres

2.5%

1.1%

0.7%

-0.4 pp

$24.73

$25.53

$25.87

1.3%

Downtown Storefront

7.0%

2.9%

2.7%

-0.2 pp

n/a

n/a

n/a

n/a
Source: Colliers International, Retail Market Reports