The Commercial Leasing market in Greater Victoria appears stable with a return to a more normalized market following the run up in 2007-2009 and subsequent slowdown through the last half of 2009 into 2010. The following observations have been noted:
- Vacancy rates in all sectors have increased to a more healthy level.
- Lease rates have decreased somewhat in sympathy to both the increased vacancy rate and the challenging economic environment.
- Class "B" Office Space is experiencing a challenging environment with significant new supply coming on the market due to several new Class "A" buildings completing construction. The result of this has drawn several Tenants out of existing Class "B" space as opposed to new Tenants entering the Victoria market.
- The Industrial market has seen an increase in the vacancy rate to a healthier level although quality, well located space is still in high demand. Lease rates have moderated somewhat for existing space.
- The Retail market continues to experience reasonable vacancy although lease rates have come down in some markets due to the challenging economic environment.
- Restaurants are starting to show signs of stress due to the implementation of the HST and the crack down on drinking and driving.
- Lease rates for New Construction have eased due to lower input costs compared to the "boom days" however these rates are still at a significant premium to existing space. In most cases though this premium is deserved as there have been some beautiful buildings constructed with several "Green" features incorporated.
The main challenge for Landlords is finding good quality Tenants. It appears as though "time" is the solution as opposed to a significant decrease in lease rates. A Landlord who is sympathetic to the current economy business's are trying to operate in might consider a "step-up" approach to their lease rates in order to work through this environment with their Tenants.
The economy will improve, nobody knows for sure when but my feeling, as I've maintained for the last 18 months or so, is we're in for a long slow recovery. Interest rates are likely to stay low for the forseeable future which should provide support for the value of commercial property, I'll explor this further in my next piece.
...The Victoria Grizzlies Jr "A" team have turned things around, leading up to their current road trip they were on a 6-0 run! Road trips are never easy, especially 4 games in 5 nights, hopefully we can come home .500 at worst and get things rolling again...
Cheers,
David
View all of my commercial real estate listings on-line at www.naivictoria.ca
Thursday, October 28, 2010
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