Vacancy rate tightens in established Toronto and Hamilton rental buildings as new supply surges
A new report shows a 3 percent vacancy rate in established rental buildings, but including new construction reveals more than one in eight units are empty.
TORONTO · The vacancy rate for stabilized purpose-built rental apartments in the Greater Toronto and Hamilton Area fell to 3 percent in the third quarter, a new report shows. The rate dropped from 5.4 percent in the first quarter as the number of occupied units grew. This measure, however, excludes newly completed buildings that are still trying to lease up. When those newer buildings are included, the overall vacancy rate jumps to 13.3 percent, meaning more than one in eight rental units are empty.
Urbanation, a market research firm, defines a stabilized building as one that has reached 95 percent occupancy. The third quarter saw a record 2,704 new purpose-built rental apartments completed across the region. The number of occupied units in the sector grew by 1,911 over the same three months, meaning new supply outpaced net demand by 793 units. "Even during the busiest leasing quarter of the year, new supply outpaced demand," the Urbanation report stated. Through the first nine months of the year, the number of occupied purpose-built rental apartments rose by 5,092 units, an increase of 22 percent compared to the same period last year.
Average rents in purpose-built buildings surveyed in both the third quarter of this year and last year were 1.5 percent lower after accounting for landlord incentives. The prevalence of those incentives also declined, with 60 percent of projects offering them in the third quarter, down from 67 percent in the second quarter. The most common incentive shifted from two months of free rent to one month. "Headline incentives shrank, but rents remain lower than last year even after accounting for fewer incentives," the report noted.
A significant pipeline of new rental supply is under construction. Builders started 12,106 purpose-built rental units in the GTHA through September, an increase of 82 percent from the same period last year. This year's starts have already exceeded the full-year total for 2025. That brought the total number of purpose-built rental units under construction to 34,545. Purpose-built rentals now account for nearly half of all apartments being built in the region.
With files from Better Dwelling