London Commercial Real Estate Overview (2025)

While current trade tensions have yet to impact the London commercial real estate sector, most businesses have adopted a wait-and-see attitude until greater clarity emerges. Two asset classes, however, have bucked the trend, with a marked shortage of industrial space driving healthy leasing activity, while population growth propels the city’s multi-family rental market.

Statistics Canada’s Annual demographic estimates, census metropolitan areas and census agglomerations: Interactive dashboard showed that London’s population rose 3.1 per cent to almost 630,000 between July 1, 2023, and July 1, 2024, bolstered by both international and intraprovincial migration. Student rentals located near Western University and Fanshawe College make up most of the multiple-unit residential construction currently underway, while luxury rental units compile the remainder, given rising demand from the city’s young professionals and empty nesters. Higher construction costs are driving rental rates higher, with one-bedroom units now commanding between $1,800 to $1,900 a month, and two-bedrooms going from $2,000 and $3,000. Cap rates are falling for existing multi-unit residential, now resting at between 4.5 per cent and 5.5 per cent.

Retail stable but evolving

Smaller retail plazas continue to be sought after by investors for future development, but product is few and far between. Retail vacancies are low, with most near or at full occupancy. The city’s larger retail properties are seeing increased vacancies, with lease rates coming down to $18 to $25 per square foot. Landlords are working with existing tenants on renewal,

with some offering rental reductions, given that they’d rather renegotiate terms than allow good tenants to leave and spent months filling empty units.with some offering rental reductions, given that they’d rather renegotiate terms than allow good tenants to leave and spent months filling empty units. The tenant mix in area malls—including both White Oaks and Westmount—is evolving with less traditional retail and more service-oriented businesses.

Industrial lease rates rise amid land scarcity

The industrial sector remains strong, with lease rates for older properties sitting at approximately $10 per square foot, while newer product is commanding $12 to $15 per square foot. Dancor Construction Ltd. has recently introduced additional industrial product to the market, although some of its speculative properties remain unsold. Developable land continues to be in high demand, but few parcels are available for sale. While there has been an influx of businesses seeking parcels of land—including those in manufacturing, research, warehousing and technology—the city is exceptionally selective in the projects they allow to move forward, with most land going to industries that will create the most job opportunities for London residents.

Office shifts to the suburbs

Vacancy rates for downtown office space continue to push higher, now sitting north of 30 per cent, as the new hybrid workplace models take hold. A-class space is performing slightly better than B- and C-class space, but tenants are increasingly drawn to office space in the suburbs, where vacancy rates were considerably lower in the first quarter of the year. Smaller tenants are especially interested in suburban office space, ranging from 500 square feet to 1,200 square feet, with the added bonus of on-site parking.

The city continues to incentivize builders and developers to convert existing downtown office space to residential housing through its Office-to-Residential CIP incentive program introduced in 2024. The first building located on Dufferin Avenue will come to market in under a year, while a second is planned for the former Rexall Pharmacy on Dundas and Richmond St. No other approvals have been issued to date.

While the London commercial real estate market remains stable for now, the threat of tariffs could have serious repercussions for the city and surrounding areas if left unresolved for too long. In the interim, population growth and migration will continue to sustain the multi-family rental market while industrial leasing benefits from a shortage of available space. In the long-term, the outlook for the city is positive, bolstered by a diverse local economy with vibrant sectors including healthcare, education, technology, manufacturing, food production, financial services, and health care. Its favourable infrastructure, proximity to major transportation routes, affordability and high quality of life will continue to draw new residents, business, and investment.