Dormant for two decades, purpose-built rental apartments are resurgent in the GTA, with eight buildings (2,458 units) under construction and 37 (9,207 units) proposed, according to a new report from Urbanation. SVP Shaun Hildebrand unpacks the renewed enthusiasm for purpose-built rental.
Only 34 rental projects were built in the GTA since 2005, a mere 6,723 units. “Construction has been flat over the last 10 years,” Shaun tells us. (Indeed, compare that to the plethora of condo buildings that cropped up in the same period.) But with affordability issues pushing rental demand to a 20-year high, the residential pipeline's been filling fast with rental developments. “If you add up all the projects under construction, and those expected to start in coming years,” says Shaun, “it’s actually 75% higher than what’s been developed in the past decade."
That doesn’t include pre-construction condo projects that might convert into rental, which is happening more lately as the purpose-built market gathers steam. Earlier this year Urbancorp canceled its Kingsclub condo complex on King West (above), announcing plans for rental apartment towers instead. And last December, the group behind The Selby, a proposed 49-storey condo project at Sherbourne and Bloor, turned it into a rental development. “Large developers and institutional investors are getting behind rental,” says Shaun.
The Honest Ed's redevelopment by Westbank Corp (above) won’t include any condos, just rental apartments. What explains the surging interest? Rental demand is at a record high as a booming young population migrates into the city centre, where it’s more expensive to buy real estate. Vacancy rates are hovering around 1%; and rent levels rose nearly 15% in the past five years, notes Shaun. “That was what [investors and developers] were waiting for: the big jump in rents." Apartment rents downtown can be higher than condo rental rates in some cases. “So it’s starting to make more sense to build rental.”
RioCan REIT and Allied Properties REIT are JVing on 602-620 King West (above), a mixed-use project with an office tower and 14-storey rental building. For years condos have been the de facto supply of new rental units, but Shaun notes renters place a premium on living in professionally managed rental apartment buildings. “It’s a secure form of housing. The unit owner isn’t going to sell it and force you to vacate.” And amid eroding affordability, more people are choosing to stay put in rental properties. “The development industry realizes the demand for rental has longevity—this is not a fad.”