During 2021’s second business quarter, the Toronto region’s rental market recovery “began in earnest,” according to new research published by Urbanation this week.
The firm revealed in its Q2-2021 rental market results that a total of 1,242 new purpose-built rental units were completed and began occupancy during the quarter. This marked the second-highest quarterly total for new supply additions in more than 30 years, falling behind the 1,782 units finished in Q1-2019.
The new supply, which was exclusively located in the City of Toronto, was met with high demand, Urbanation reported. Quarterly net absorptions in the rental stock, which is the change in total occupied units, increased to 716 units. This is four times higher than the level one year ago, then 179 units, and 67 percent above the five-year quarterly average of 430 units.
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Average GTA rental prices for newer rental buildings also posted gains in the second quarter. Although rents dropped by five percent annually, average prices rose 1.9 percent from quarter-to-quarter to $2,289. This rent increase is the first since the start of the pandemic, Urbanation reported. However, incentives like free rent are still popular, with 88 percent of surveyed buildings indicating that they are offering some type of renter incentive.
Shaun Hildebrand, President of Urbanation, noted in the quarterly report that the GTA’s rental market began to “resemble pre-pandemic times” during the year’s second quarter. Hildebrand pointed to the region’s “strong foundation of demand,” which is anticipated to grow as immigration returns, schools and offices reopen, and the high costs of homeownership lead to more renter households.
“While new construction activity is also on the rise, the level of supply underway is expected to lag behind demand, creating conditions for rents to continue rising towards pre-COVID levels and beyond in the months to come,” Hildebrand added.
The rental results, a survey of newer purpose-built rental apartment projects that have been completed within the Greater Toronto Area, found that the vacancy rate fell to 5.2 percent by the end of the quarter. This is down from a high of 6.5 percent in Q1-2021, but remains far above the 2.1 percent rate from a year ago, the report said. The vacancy rate data gathered by Urbanation excludes new buildings that are still in their initial lease-up phase.
When comparing the City of Toronto to the surrounding “905” region, vacancy rates tended to be higher in the city. Urbanation reported that vacancy rates averaged 6.9 percent in the City of Toronto, a decrease from 8.8 percent reported in Q1-2021 but up from 2.7 percent in Q2-2020. In the “905,” the vacancy rate averaged 1.4 percent, a slight decline from 1.5 percent in the previous quarter and an increase from 0.8 percent in Q2-2020.
The number of leases signed for condominium rentals in the GTA have more than doubled from where they were a year ago, ramping up 108 percent to 12,747 units, the highest Q2 level on record. When examining the past four quarters, Urbanation found that condo lease transaction activity reached 50,004 units, 58 percent higher than the pre-pandemic peak of 31,696 units leased in the four-quarter period prior to Q1-2020.
Demand for rentals in the former City of Toronto was a main driver for this increase, which resulted in 7,642 condo lease transactions, suggesting an ongoing migration of renters moving back into the core, Urbanation stated.