London's core has more vacant office space than any other Canadian city: CBRE

A record 31.4 per cent of London's downtown office space, nearly 1.3 million sq. ft., is currently sitting vacant, the highest rate of any Canadian city, according to new numbers released by the commercial real estate company CBRE.

It's a jump from the 27.3 per cent vacancies recorded in the downtown at the same time last year, according to a report from CBRE.

While office vacancies rose in the downtown, they fell in the suburbs. The suburban market saw a vacancy rate of 9.3 per cent for the quarter, down from 10 per cent a year ago.

Overall, 25.7 per cent of leasable office space in London is empty, the report said. London has just over 4.5 million sq. ft. of leasable office space in the downtown, with 1.57 million in the suburbs.

But the rate is a lagging indicator, said Greg Harris, an associate vice president with CBRE based in London, pointing to positive trends nationally that could suggest where things are heading locally.

"We're starting to see larger centres such as Toronto turn the corner and show some positive signs of demand and a lowering vacancy rate," Harris said.

"That does filter down to London, as a lot of our office users are subsidiary offices of some of the larger groups based in the major markets."

The uptick in vacancies isn't being driven by companies fleeing London or the core, where more than 75 per cent of the city's office space is located, Harris said. 

In most cases, he said, it's firms downsizing their footprint when leases expire, a trend that ramped up during the COVID-19 pandemic as more office jobs went remote.

"We haven't seen any major exodus from the downtown core. Most of the companies in downtown are staying downtown," he said. 

That's partly a function of city bylaws governing where office space can be developed, and the small amount of office space outside downtown, he added. 

London led other cities in declining suburban office vacancies, recording a 130 basis point drop in the quarter. At the same time, it recorded Canada's second-highest increase in downtown vacancies, rising 110 basis points.

Across Canada, downtown office vacancies rose to 19.7 per cent in the third quarter, CBRE says. 

Barbara Maly, executive director of Downtown London, said the local figures weren't surprising, and says the BIA is looking at ways to promote vacant commercial space.

It's also been working with city hall to draft a downtown master plan to map out the core's future, the details of which are still being finalized.

"Lots of things have changed since COVID, so we now have to rethink what downtown may look like," she said, pointing to Calgary's work to convert several million square feet of office space into housing.

Calgary saw the second-highest downtown vacancy rate of the quarter at 29.6 per cent, down from 30.9 per cent a year ago, driven in part by building conversions.

"We need to be intentional. We need to know the types of sectors we want down here. How do we quantify success? We really don't have those metrics laid out," Maly said. 

Maly acknowledged a short-term solution was needed to help businesses until a more long-term solution is found.

Ward 13 Coun. David Ferreira, who sits on the BIA's board, said the draft plan is expected soon, and says he's had talks about interim support for Downtown London, including a possible funding bump.

"The interim support just to get us there, to make sure that the plan is relevant, and to make sure that our business community in the core is supported, that's what we're really trying to focus on now," he said.

London has followed Calgary's lead, and is offering grants to convert Class B and C office buildings into housing, equal to $35,000 per unit.

Harris estimates most of London's downtown offices are Class B and C, which struggle to find tenants as they are older and need amenity and infrastructure upgrades.

"Not every office building can be converted. I'm not sure how much more we'll see, but the city has a program which is definitely helping," he said. Some owners may wait to see how active conversions pan out.

London's skyline has sprouted several high-rises in recent years, and an influx of residents should bode well for the core, he added.

Earlier this year, CBRE reported roughly 678,000 sq. ft. of office space had been removed from the London market in 2024 through initiated and planned conversions and building demolitions.