With rental condominium unit vacancy rates hovering around the 1.8% mark and with an average rent of $1,750/month for a 2 bedroom unit, the condo-rental market in Toronto is hot, and has not gone unnoticed by developers.
Over the last year, Toronto has seen a surge in purpose-built rental units by developers seeking to tap into this market. According to Urbanation Inc., the number of purpose-built rentals under construction is up 75% over the last 10 years, with 26 apartment buildings under construction in the Greater Toronto Area, adding over 6500 units to the rental pool. There are another 43 proposed projects totalling over 10,000 units to be added to the rental pool. The numbers are astounding: Toronto has not seen this kind of activity in the purpose-built rental sector in over 25 years.
These numbers indicate a growing trend that home ownership for many Torontonians is either unattainable, or that many are making a conscious decision not to go down the Toronto Real Estate rabbit hole and spend their money elsewhere, to avoid the craziness of today's market.
Notwithstanding the dearth of modern apartments in our City, the condo unit rental market is especially attractive to Toronto renters as these units are more centrally located and offer a range of amenities not found in the typical purpose-built buildings. Developers have recognized this, and the variety of projects that are coming to market reflect this. One example is Mod and Tricon, who have teamed up and responded with "The Selby" – a 50 storey tower located one block south of Bloor Street on Sherbourne Street. The Selby will offer luxury amenities and concierge services targeted at millennials who for one reason or another, continue to rent, and baby-boomers swapping home ownership for a downtown, luxury lifestyle. Other purpose-built projects around the City include Westbank's project at the old Honest Ed's site with 1000 rental units proposed and an uptown project by RioCan REIT and has potentially 6 more projects in the works.
As property prices continue to increase, so too will the demand for rental units as home ownership becomes an unrealistic – or unwanted- goal in Toronto. As these projects near completion, it will be interesting to watch how this affect the rental condominium vacancy rates, especially as condominium construction proceeds at a rate 8 times greater than that of purpose-built rental.
