Real estate developers say homelessness, drugs hinder downtown London's full-scale revival

Real estate developers say homelessness, drugs and the prevalence of people suffering from severe mental illness is holding back the full-scale revival of downtown London by making it a hard sell for prospective office tenants as the core looks to turn the corner after the COVID-19 pandemic. 

The downtown has long been the beating heart of London, Ont., where street life moved to the pulse of rush hour traffic and the nine-to-five crowd, whose rhythms made the neighbourhood's tangle of offices, shops and restaurants teem with life for 10 hours a day, five days a week. 

But then the virus upended everything, throwing off the core's rhythm and gutting its office sector when remote work suddenly replaced the commute, accelerating the decadeslong flight of office workers to the suburbs while doubling the city's homeless population. 

Since the virus peaked, the downtown still bears the scars. Empty offices and shops are hidden behind colourfully-painted plywood facades — public art that stands in sharp contrast to the nearby scenes of urban squalor where the unsheltered and the drug-addled lie slumped in the streets as passersby pretend not to notice.

Social problems an uncomfortable topic, says realtor

"It is probably the biggest issue that people don't like to talk about. They don't like to make themselves seem as though they're insensitive to what's happening to these people, but that is it," said Roger Caranci, a commercial realtor and former veteran city councillor

Caranci said the homelessness, drugs and severe mental illness that often comes with them is a deal-breaker for many of the clients he's looking to court.

Just two months ago, Caranci recalls a client who was interested in a long-term lease and said they had to take a pass after they got an eyeful of London's rampant social problems. 

"They said to me, 'You know what? As much as the building fulfills our needs, as much as it's the perfect spot, we don't want to rent here because of this.'"

Farhi Holdings Corporation owns, by far, the largest share of downtown London's empty buildings at 60 per cent. 

Shmuel Farhi, the company's president, wrote in an email to CBC News, citing "socio-economic issues" as well as "drug use and crime" as what he sees as the biggest reasons for the downtown's high commercial vacancy rate, and what he called a comparatively "healthy" vacancy rate of seven per cent in the city's suburbs, which he blamed for the "cannibalization of the core."

"The suburban office market isn't constrained by the same issues facing our downtown," he wrote. "We have seen over 2,000,000 square feet of commercial tenancy flee from downtown to failed big box retail centres, indoor malls, strip plazas and new design-built offices in the suburbs."

City spent millions to fill the void

In an attempt to fill the void, the city has spent hundreds of millions of dollars on better infrastructure, connecting cultural attractions such as Museum London, Budweiser Gardens and the central branch of the London Public Library and filling empty land with gleaming new residential towers rising above the gritty 19th and 20th century storefronts.

The efforts seem to be paying off. The neighbourhood was the fastest-growing in London at the time of the 2021 census, but despite new developments and a stronger downtown police presence, the problems of homelessness and drugs persist. 

Adding to the problem are Canada's still rising interest rates, which, on top of remote work, have dealt a double blow to the city's office sector, making the languishing problem even harder to solve. 

"After COVID, those prospects are fewer and far between," said Kapil Lakhotia, the CEO of the London Economic Development Corporation, adding that homelessness and crime aren't the only factors that could discourage new tenants from coming to the city. 

"It's never one thing in isolation," he said. "There are a number of different things that they could be evaluating, parking is one of them, their hours of operation and number of in-person and hybrid employees. So companies across Canada are doing this." 

As interest rates rise amid an office sector mentality of shrinking footprints, it could signal a dim future for the city centre, which is also a pillar of the city's economy. 

It's why London Mayor Josh Morgan said the city is encouraging core development away from the office monoculture and toward more of a mixed-use core that's residential-friendly. 

"We need lots and lots of people living downtown," he said. "If you create a self-sufficient system where people can walk out their front door, they can support those local businesses themselves.

"Often we get fascinated with 'how do we get someone way out in the suburbs to come downtown.' We don't have to do that if we have people living downtown every single day."