MARKET OVERVIEW
Our Victoria office commenced operations in the spring of 2001 as J.J. Barnicke Victoria Limited and has since offered comprehensive, professional and highly personalized real estate services to its growing local and national clientele. Our energetic team is commited to providing outstanding sales, leasing and advisory services for retail, office, industrial, hotel, multi-residential and land develpment transactions. Recently, J.J. Barnicke Limited has become the Canadian operation of DTZ, one of the world's top four gloabl advisors in commercial real estate. This is a tremendously exciting and positive move for us and will expand out service delivery to all our valued clients.

Beautiful Victoria, British Columbia is a sophisticated seaside City located on the southern tip of Vancouver Island. The region is the vacation capital of Canada and the premiere tourist destination in the Pacific Northwest, contributing over one billion Canadian dollars a year in revenue to the local economy. Victoria's temperate climate, natural beauty and laid-back lifestyle make it an attractive place to visit and a wonderful home to over 335,000 people. The City's British colonial heritage is still very much apparent today, but contemporary Victoria has a distinctly Pacific Northwest flavour with cosmopolitan dining, superb shopping, a colourful nightlife and a full complement of cultural offerings.


Greater Victoria Office Market
The Victoria office market continues to be in a state of acute undersupply as market demand is continuing to eat up existing supply, driving vacancy rates down and rental rates up. The overall vacancy rate for space of all classes reached a historic low of 2.3% in mid-2008 and is expected to decrease furhter by the end of this year.

Vacancy

The office market has seen decrease in vacancy rates. Downtown vacancy remains tight with few viable space options, particularly for medium and larger size tenants. The suburban vacancy rate dropped nearly 2 full points to 4.0%. Overall Class A vacancy increased to 1.0% due to the completion of Upper Harbour Place Phase II, however Class A vacancy in the downtown core remains negligible. Class B vacancy also decreased over the last year from 3.3% to 2.5%, accentuating the problems downtown for better quality space. Class C vacancy has increased slightly to 7.5% but remains a relatively illiquid segment of the market as the vast majority of tenants prefer higher quality space.

Absorption

There are a few buildings now under construction but none to be completed in 2008. In fact, this year the market has seen a reduction in inventory of approximately 35,000 square feet with the demolition of the former Telus building at 800 Yates Street and the partial demolition of 3347 Oak Street. The lack of supply has severely limited overall market absorption to just over 40,000 square feet (only 12,000 downtown), which is only 1/3 of the five year annual average. The new buildings now under construction include the “Atrium”, a 200,000 square foot building at 800 Yates Street that will be completed in mid-2010 and is already substantially pre-leased. There are three smaller buildings to be completed in 2009 that cumulatively will add 70,000 square feet, only 10,000 square feet of which will be downtown. This new inventory is already substantially pre-leased. The new development at “Uptown” (the former Town & Country shopping centre) will also include new office space in the order of 100,000 square feet which should be ready for occupancy in 2010. The emergence of ultra-tight market conditions has caused rental rates to rise dramatically over the past couple of years. We see this upward trend continuing for about the next two years as it is unlikely that any material amount of new supply will be completed before then. Given the recent slowdown of residential condominium sales, many developers have set their sights on office development though there remain many obstacles to new construction, particularly in terms of meeting the pre-leasing requirements of lenders.

Greater Victoria Retail Market

British Columbia’s strong economy and Greater Victoria’s rapid growth in housing over the last 5 years provided a healthy market for retail goods and services. In recent years there has been limited supply resulting in low vacancy and upward pressure on rental rates. In response to increased demand, many redevelopments and expansions have been proposed and are underway. Specifically, Uptown (previously Town and Country Shopping Centre), Hillside Shopping Centre, Tillicum Shopping Centre, and Westshore Town Centre have all pursued increased density to their lands. The rapid growth within the Westshore has led to significant retail development in Langford, evidenced by Millstream Outlet Mall, Bear Mountain, and again Westshore Town Centre (formerly Canwest Mall).

The last couple of years have not provided any significant new supply of retail space in the downtown core, though new developments will add to supply. The ‘Juliet’ and ‘Falls’ both contain retail components, as does the LeFevre development of lower Yates buildings (formerly the CRD buildings). A slowing economy, a drop in tourism and sharp decline in residential property sales will likely put the brakes on retail sales growth in Greater Victoria through 2009. Consumer confidence has waned in recent months and if continued will likely result in decreased demand and leveling of rental rates.

Greater Victoria Tourism Market

Victorians are blessed with a beautiful city, a magnificent setting and a climate that is the envy of the rest of Canada. Therefore, it is not surprising that tourism is a primary industry in Victoria generating over $1 billion in revenue annually. In 2007, Victoria saw increases in room revenues, hotel occupancy, average daily room rates, and both airport and ferry transportation. In 2008, despite the drop in American tourists and the calamity in North American financial markets, tourism industry revenues are expected to be close to or slightly higher than last year’s figure of $1.23 billion.

Greater Victoria Industrial Market

Greater Victoria’s industrial market continues to experience an unhealthy combination of steady absorption and limited new supply, which has kept the vacancy rate well below 1%. This market condition is largely attributed to a shortage of industrial zoned land, rising land values, escalating construction costs, and a strong economy throughout British Columbia. Demand continues to outstrip supply, putting upward pressure on lease rates, along with corresponding increases in overall industrial property values. Fortunately, there are a number of proposed developments that could provide some relief to the sector in 2008/2009. Economic variables continue to support growth in the industrial market ensuring industrial real estate will continue to be highly sought after in coming years.

Greater Victoria Investment Market

In light of current economic conditions and volatility in the financial markets, Greater Victoria has recently seen for the first time in several years upward pressure on capitalization rates for investment properties. Nonetheless, demand remains strong with market value for prime retail and office properties at cap rates as low as 6.0% with the majority ranging between 7.5% and 9.0%