Despite macro-level market headwinds, London’s commercial real estate market has remained relatively stable, supported primarily by sustained demand for industrial and retail properties, and to a lesser extent, multi-unit residential assets.
Industrial supply constraints in London fuel competition
The industrial sector has remained the strongest-performing asset class, driven by shortages of available inventory. Limited new product has been coming on stream in 2026, as developers have moderated new construction activity. This constraint has created highly competitive conditions for existing properties. To illustrate, a 4,000-sq.-ft. warehouse recently listed for sale in an industrial park attracted eight showings and ultimately sold with three competing offers. Demand has been most pronounced for freestanding buildings ranging in size from 5,000 to 30,000 sq. ft., with owner-occupiers retrofitting to meet their operational needs. In contrast, larger-format properties exceeding 100,000 sq. ft. or more have continued to face leasing and disposition challenges given limited demand. Overall property values have increased in London, and lease rates have followed suit, especially for newer product.
National market continues to evolve
REMAX Canada’s national 2026 Commercial Real Estate Report examined first-quarter activity across 12 major Canadian markets and found that the commercial property market has continued to evolve with improved absorption, particularly in the office sector, where return-to-office mandates are supporting increased leasing activity in premium space. Industrial demand has remained durable nationwide, with inventory challenges persisting. Retail fundamentals have continued to outperform expectations, supported by population growth and infrastructure investment, reinforcing long-term demand. While capital deployment has been measured in most markets analyzed, improving financial conditions have prompted renewed interest in well-located, income-producing assets.
Demand for land in London that’s ripe for industrial development has been evident, but available parcels remain few and far between. Much of the available city-owned land has been sold at a discounted rate to manufacturing companies that commit to bringing employment to the area. The strategy is intended to stimulate job creation and generate long-term employment tax revenue, ultimately supporting London’s thriving manufacturing base and overall economic growth. As a result, London’s diversified economic base has continued to grow. According to the City of London’s Manufacturing Sector Profile Highlights, major announcements have included a $20-billion investment by Volkswagen to build batteries for electric vehicles; an influx of $165 million by Medicom Group to open Canada’s first medical grade nitrile glove plant; and a $33.6 million investment by Andriani Ltd. to establish North America’s first gluten-allergen and GMO-free pasta production facility. Western University has also broken ground on a state-of-the-art infectious disease facility valued at $44 million.
London retail tight, competitive and evolving
The retail segment has continued to perform well, with most retail plazas fully occupied throughout the city. In terms of leasing, 1,000- to 2,000-sq.-ft. units have been most sought after and moved quickly. Large square footage tends to take longer to lease. Investor demand for this product overall has been insatiable, but supply has been limited, with many strip malls and retail plazas moving in off-market sales. Given saturation of the multi-unit residential market, new owners have been making improvements to older plazas, updating and enhancing space, and turning excess parking into new retail opportunities within the existing footprint. Mixed-use residential/retail developments have also been popular.
Downtown office struggles to recalibrate while suburban office space improves
Despite some return-to-office mandates, the surplus of downtown office space has remained exceptionally high. While landlords have largely been patient, two properties have recently come to market, including a four-acre parking lot listed for sale at $40 million, and the former London Free Press site offered up at $1, indicating a willingness to entertain offers.
Incentives to convert downtown office space to multi-unit residential use has continued, with London now throwing in up to $35,000 per door and absorbing some development charges to encourage the creation of more affordable housing in the city centre through its Office-to-Residential CIP Investment Program. However, the program has been slow to gain traction. While two buildings have undergone conversion to date, uptake has largely stalled. A growing oversupply of rental accommodations, combined with the pending influx from projects currently under construction and the numerous purpose-built rental applications currently on file at City Hall, has rendered most conversion projects economically unviable.
By contrast, suburban office space has continued to do well, benefiting from ample parking, access to green space and lower operating costs. Tenant demand in these areas has remained relatively stable, and vacancy rates are materially lower than those in the downtown core.
Purpose-built rental vacancy rates at 15-year high
Student housing has been a major driver in the local rental market, despite the drop in foreign student enrollment in 2025. As such, REITs and Toronto-based investors have continued to play a major role in London’s residential real estate market by acquiring existing apartment buildings and increasing value by upgrading. Earlier this year, Pier 4 REIT purchased Royal Oak Terrace, 558-unit apartment complex situated on 22 acres for $102.5 million.
According to the Canada Mortgage and Housing Corp.’s 2025 Rental Market Report, purpose-built rental vacancy rates hovered at four per cent in 2025, the highest levels in 15 years. Meanwhile, nearly 2,600 new units were expected to come to market between January and September of 2025. Condominium apartment rentals were considerably tighter, with vacancy levels running at 0.2 per cent in 2025.
London has entered 2026 supported by a diversified economic base, sustained population growth and significant institutional investment tied to advanced manufacturing, life sciences and education. Major capital commitments, most notably Volkswagen’s EV battery plant, are expected to bolster employment and drive long-term demand for industrial space, while continued in-migration and a strong student population underpin housing needs. Yet, near-term challenges remain, particularly in the downtown office sector and purpose-built rental market, where rising supply has tempered absorption. As economic conditions stabilize, London is well positioned to see more balanced conditions emerge through 2026, with industrial and necessity-based retail continuing to lead the market.
