The number of newer rental apartments in the GTA that are empty and ready for new tenants is at its highest level since a leading real-estate consulting firm started keeping track in 2015.
According to Urbanation’s survey of purpose-built apartments completed since 2005, the average vacancy rate rose from a low of 0.3 per cent in the second quarter of last year to 1.5 per cent in the second quarter of this year.
The Toronto firm added that the “availability rate” — which includes vacant units as well as occupied units where the tenant has given notice to leave — jumped from 1.4 per cent to 2.3 per cent over the same time period. The vacancy and availability calculations don’t include buildings that started moving in tenants in the past 12 months, the firm notes.
Shaun Hildebrand, president of Urbanation, pointed to a rising trend in purpose-built rental development over at least the last few years.
“It’s developers recognizing the record level of rental demand in the GTA, which has pushed rent levels up to where it makes economic sense for developers to build new rentals again,” Hildebrand said.
“This is the result of rental development planning that goes back a few years now. These units are starting to reach completion. What we’re seeing is that over the last 12 months we’ve reached a 25-year high for new rental (apartment building) completions.”
The firm noted that while the number of units that began construction plummeted from 2,635 in the second quarter of last year to 370 in the second quarter of this year — hitting the lowest number since 2016 — the number of units planned but not yet started jumped from 39,444 to 44,093. Only 20 per cent of those units have been approved for construction, however.
Urbanation noted the growth in purpose-built rental applications follows the Ontario government’s decision to lift rent controls on new buildings as well as several other incentives, such as Canada Mortgage and Housing Corporation’s expansion of low-cost construction loans.
Though he hadn’t seen the report, Dave Wilkes, president and CEO of the Building Industry and Land Development Association (BILD), said he was pleased to hear vacancy rates are up.
“There’s certainly a demand (for rental units), and I do believe the direction the government is taking on rent controls is facilitating this activity,” Wilkes said, referring to the vacancies.
The Urbanation survey released Friday covers the area from Burlington to the west, York Region as far as Newmarket to the north and Oshawa in Durham Region to the east, with Toronto being the most southern point.
Meanwhile, a different survey by rentals.ca found a “softening” in Toronto’s downtown core when it comes to rental rates for investor condos.
“Many of the (prime downtown) areas are experiencing lower asking rent per square foot in Q2-2019 versus Q4-2018,” Friday’s report from real-estate advisory firm Bullpen Research and Consulting finds.
In an interview, Bullpen’s president Ben Myers noted that Toronto’s entertainment district, for example, saw average rent for condos drop from $2,672 per month in the last quarter of 2018 ($4.04 per square foot) to $2,605 a month ($3.97 per square foot) this year.
He said the apparent softening could be a result of the “composition” of condo units for rent.
“You never know. Sometimes it’s just the composition of units changing. You get more three-bedrooms on the market, and (they) typically have a lower rent per square foot and spend longer on the market. Sometimes it’s not comparing apples to apples,” Myers said.
“But to see that many of the (downtown) postal codes actually go down gives you more confidence to say the market is softening slightly.”
Of the 13 downtown postal codes tracked in his firm’s survey, condo rents went down in eight areas and up in five.
Donovan Vincent is a housing reporter based in Toronto.