Southwestern Ontario commercial real estate markets ended 2025 on a positive note. Office vacancy in London, ON and Waterloo Region hovered around 31.0%. Meanwhile industrial availability rose in London and Waterloo Region, but for different reasons. Economic shifts hindered businesses in London and 1.2 million sq. ft. of new supply was being worked through in Waterloo Region.
We spoke with CBRE Southwestern Ontario Managing Director Phil Coley to see what he’s got his eye on this year in the SWO commercial real estate markets.
Retail Stays Strong
Retail has been a bright spot lately, showing surprising strength. Retail plazas are actively trading, with strong buyer demand and relatively few sellers, making this the hottest asset class in the region. Interestingly, our retail brokers were leading the charge on deals for the first half of the year, which is not typically the case, and that’s a great news story.
Clients have been saying, “Find me a retail plaza to buy,” and right now, retail is the asset of choice. The focus isn’t on large supermalls but rather on strip malls and grocery-anchored properties – practical, community-driven assets that offer stability. I’m hoping it’s steady as she goes but with more trades this year.
Industrial Activity Picks Up
Industrial activity has definitely picked up over the past few months. Early 2025 was slow as everyone hit pause, waiting to see how the tariff situation would play out. Southwestern Ontario felt that uncertainty more than most, being surrounded by borders made the impact significant. But by year-end, we started to see movement, with plenty of paper trading happening behind the scenes.
Now, the tone has shifted. Groups are finally making lease decisions and pushing forward, and it’s been much busier. Most of the spec product between Cambridge and Waterloo Region now has paper on it, quite a change from six months ago when there was nothing. The outlook for industrial is strong, and we expect Q1 and Q2 of 2026 to bring a wave of deal closings and trades.
Manufacturing remains a big part of the story here, especially automotive. While some plants have closed, the Volkswagen EV plant in St. Thomas is full steam ahead. They’re pouring footings now, a great sign, and moving forward with 6 million of the planned 12 million sq. ft. This project will create significant spin-off opportunities and jobs, with the workforce expected to grow from 200 to 400 employees.
Office Market is a Tale of Three Cities
In London the office market activity is steady. We’re seeing renewals and right-sizing, and while downtown vacancy remains high, deals are still getting done. The pace hasn’t slowed much, which is encouraging.
In Kitchener, things are quieter. There have been some portfolio sales and investments, and some early renewals in the tech sector, which is a positive sign. A few tenants are floating around looking for space, but overall, momentum is still building.
Guelph is a different picture, with limited office product and vacancy, but a handful of requirements in the 10,000–12,000 sq. ft. range. That’s leading to some creative thinking among tenants.
Looking ahead, we’re hoping to see the push back to office that’s already happening in Toronto make its way to Kitchener-Waterloo over the next 6 to 12 months. With a strong tech workforce here, mandates from major players could be a game-changer. Google is already doing it, and if Amazon follows suit, the market could shift quickly. Banks and governments are mandating return-to-office now, so we expect other sectors to follow.
Land Sales Halt
Land sales have come to a near standstill. After four years of land flying off the shelves, we’re now back to pre-pandemic trading levels, or even lower. The biggest challenge? Vendor expectations are still out of sync with buyer expectations. They’re slowly moving closer, and we’ve seen a bit of trading, but nowhere near what we’re used to.
For now, there’s not a lot of positivity in this asset class. It will likely take another 12 months for pricing expectations to align enough to spark real activity. Interest rates trending downward should help, but in the short term, we don’t expect much change in land sales over the next year.
Multifamily Market Not Moving
It’s a tough space right now. Condo land sales have completely stalled, nobody is buying, and projects are on hold as the market works through its challenges. Multifamily isn’t faring much better. Despite strong demand, the economics just don’t make sense at the moment. Construction costs and financing hurdles have squeezed margins to the point where new builds aren’t happening.
For now, this sector is in wait-and-see mode until conditions improve enough to make projects viable again.
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