Toronto apartment vacancy rate just hit a record high 5.7%: Urbanation

Purpose-built rental apartment buildings in the City of Toronto reported a record-high 5.7 percent vacancy rate in the final months of 2020, up significantly from the 1.1 percent rate recorded in the same period the previous year.

Housing market data firm Urbanation released the vacancy rate figure this week as part of its fourth quarter rental market report.

According to the report, the 5.7 percent vacancy rate represents a 50-year high when looking at historical rental market survey data available back to 1971.

As the vacancy rate rose, rent prices for purpose-built units declined 10 percent in the fourth quarter to an average monthly price of $2,337. On a per square foot (psf) basis, rent in the City of Toronto declined 6.2 percent to $3.49 psf.

There was a dearth of new purpose-built rental units under construction for the better part of the 21st century in Toronto, which resulted in investor-owned condos only partly filling the rental supply gap. This trend shifted dramatically in recent years when the pipeline of purpose-built rental projects began significantly expanding. By early 2020, the number of units under construction across the Toronto region hit 13,764, a multi-decade high, according to Urbanation.

But a confluence of factors brought about by the COVID-19 pandemic has meant much more of this new rental supply is sitting unoccupied compared to past years. In its report, Urbanation said 3,563 rental units were completed in 2019, with 70 percent occupied by the end of that year. In 2020, there were 1,699 units completed, with only 44 percent occupied by the year’s end.

“The GTA rental market faced its toughest challenges to date in 2020 due to COVID-19,” said Urbanation President Shaun Hildebrand.

“While rents have a long way to go before returning to their peak and supply will continue to be a headwind in the near-term, some improvement can be expected in 2021 as vaccinations eventually lead to higher immigration and at least a partial return to the office for downtown workers and in-class learning for post-secondary students,” he added.