Greater Victoria office vacancies hit historic high as other cities reverse trend

A recent report indicates 10.7 per cent of Greater Victoria’s offices are empty — the highest vacancy rate in decades.

As major Canadian cities see their office vacancy rates drop, the number of empty office spaces in Greater Victoria has reached a historic high.

A recent report from Colliers indicates 10.7 per cent of Greater Victoria’s offices are empty—the highest vacancy rate the region has seen since Colliers started tracking the data in 1987.

“Coming out of COVID, we generally had higher occupancy levels and therefore lower vacancy,” Colliers vice-president Anna Wray told CTV News.

“But in the last 12 (to) 18 months, the rest of Canada—or the bigger markets in the rest of Canada—have really started to see their vacancy drop, where ours has started to rise.”

The region has 9.1 million square feet of office space, of which well over 900,000 are unoccupied, Colliers said.

Wray attributes the rising vacancy rate to the offloading of office space by the province and tech companies.

“Our office market across Greater Victoria is roughly 50 per cent government agencies,” she said.

B.C.’s Ministry of Infrastructure confirmed it’s eliminating some Victoria offices and doesn’t plan to buy or lease more.

“We are consolidating ministry offices and ending leases for underused spaces to make better use of government buildings and reduce costs,” a ministry spokesperson said in a statement.

The ministry said it has a hybrid workplace strategy, which guides its reviews of government real estate assets. The strategy strives to use less office space, lowering lease, utility, and operating costs, along with greenhouse gas emissions.

Unlike B.C., the governments of Alberta and Ontario have mandated their employees work in the office full-time.

Wray said that, paired with a push for in-office work by major employers like banks, has increased occupancy in major cities such as Toronto.

“We don’t have a huge demand of office occupiers looking for space right now, so I think … there’s going to be more plateaus before we start to see pickup in occupancy,” Wray said.

Traffic a compounding factor

Downtown Victoria Business Association CEO Jeff Bray said empty offices hurt businesses in the core.

“This was a downtown that was built on three populations: tourists, residents, and 9-to-5 workers,” Bray said. “We have a big hole in the nine-to-five workers and that’s not going to change anytime soon.”

Bray said traffic has worsened in recent years, potentially deterring companies from leasing downtown.

“We’re hearing from businesses, including those in commercial office spaces, that … travelling in and around downtown is becoming increasingly difficult for workers, as well as for their customers and clients,” he said.

“If that doesn’t reverse, those existing businesses are going to move out.”

Victoria Mayor Marianne Alto said the municipality is juggling road maintenance, major infrastructure upgrades and long-term plans to make the city an easier place to navigate for people who don’t drive.

“It is a complex, complex discussion,” Alto said. “It’s one that I know that our staff are constantly, constantly grappling with trying to find the best balance, the best compromise for everyone as much as possible.”

Alto and Bray said they’ve shared their concerns about the vacancy rate with government officials.

“We need to be part of a plan that allows this to unfold gradually,” Alto said.

“(They) have to give us some time to navigate a new relationship in downtown cores with their workers and be able to manage the shifts that are inevitably coming.”

In the meantime, the city is working to make downtown more appealing, with events, safety initiatives and tax relief for local businesses.

The case for conversions

The city of Calgary is converting office towers for residential and other uses. Since 2021, it has completed seven conversion projects, building a hotel, a school of architecture and 2,700 residential units.

Calgary downtown strategy director Thom Mahler said the oil price crash of 2014 served as the program’s genesis.

“(The crash) took a significant number of jobs out of our downtown market and returned a whole bunch of office space,” Mahler said.

“We lost … $16 to $17 billion in property value, which was about a 68 per cent drop in the value of our downtown tax base.”

Mahler said some of the conversions were technically challenging, requiring significant reconfiguration.

“But these units—I’ve been through many of them—they are indistinguishable from a brand new, purpose-built rental,” he said.

It raises the question of whether an office conversion program could work in Greater Victoria, which is in the midst of a housing shortage.

Wray said it wouldn’t.

“We have a thing here called the seismic code, which isn’t the same as in Calgary,” she said, noting the regulations differ for commercial and residential spaces.

“If you look to convert a building here, you would have to bring it up to B.C. building code for residential, which would be another compounding factor in terms of cost and work done.”

Wray said that leaves Greater Victoria to rely on small businesses and entrepreneurs to grow into the region’s empty offices.