Greater Victoria’s industrial property vacancy rate has climbed to 5.69 per cent, reaching its highest level in 15 years.
Tenants have been moving out of large warehouses, creating a glut in supply, according to a market report released this week by Colliers International’s Victoria office.
The vacancy rate is expected to rise even higher this fall after Wilson Foods moves out of more than 125,000 square feet of industrial space on Viewfield Road in Esquimalt, said Ty Whittaker, the report’s author and a senior vice-president with Colliers International Victoria. The Capital Regional District bought the Wilson site for $17 million to build a biosolids plant, but scrapped the plan in the face of community opposition. It has been for sale, at an undisclosed price, since December.
Back in 2000, the capital region’s industrial vacancy rate was 4.8 per cent.
That subsequently tightened up to just 0.20 in 2007, but has been moving higher since. A year ago, the rate was 4.59 per cent.
“Our market has always been fairly steady and stable, but we have got a number of larger buildings that are becoming available,” Whittaker said.
Some major tenants are moving out of their spaces, creating a “big void” in business parks, he said.
These sites will slowly get filled because they are in good properties in good conditions, Whittaker said.
Small- and mid-sized industrial space is more in demand, the report said.
“The increase in overall vacancy is a byproduct of a flight to quality, with a move from older buildings to newer product.”
Industrial buildings with modern features, good loading facilities, tall ceilings and located near the downtown core are especially sought-after, the report said.
Greater Victoria’s net absorption for industrial properties is at negative 66,468 square feet, much of it in the West Shore and Saanich, the report said. Net absorption is the difference between tenants renting space and tenants moving out, measured over a particular period of time.
The capital region has 9.2 million square feet of industrial inventory, with 524,216 square feet vacant, the report said.
Despite the higher vacancy rate, the volume of industrial property has been fairly stable year-over year, Colliers said. As of mid-2015, total sales reached $37.8 million, up from mid-2014 at $36.1 million.
In Central Saanich, the Keating Industrial Park had the largest year-over-year increase in vacancy, moving from 3.9 per cent in mid-2014 to 9.29 per cent this year with 142,000 square feet of vacant space, much in older buildings, the report said.
However, Graphic Office bought a new 35,500-square-foot building in the Sean Heights Business Park, which is within the Keating Industrial Park.
For the fifth consecutive year, Saanich has posted the highest vacancy rate, at 9.41 per cent, as large bulk warehouse space remains empty, the report said. Silian Corp., Sears and Zellers are vacating the Royal Oak Industrial park.
In Saanich’s favour is the popularity of the convenient Mayfair-Uptown area.
The West Shore saw its vacancy rate move to 4.47 per cent this year compared with 0.7 per cent in mid-2014, the report said. That’s largely due to Canpar Freight and the Department of National Defence relocating.
“Traffic congestion is the biggest concern for industrial tenants contemplating locating to the West Shore as the volume of industrial development has not been able to expand to keep pace with increasing residential construction,” the report said. Transportation initiatives such as the Spencer Interchange should help ease traffic congestion and a number of business parks are being considered for that area.
Sidney and North Saanich have the lowest vacancy rate, at 0.47 per cent. Viking Air has leased 10,000 square feet on the Victoria Airport lands, and Ralmax Group of Companies has bought the Ramsay Machine Works property.
