Is the Downtown Toronto Rental Market Finally Calming Down?
There's no question that rentals in the core are still expensive, but has some additional supply finally cooled off the frenzy?
I do a lot of rentals. Specifically downtown rentals. I enjoy it. It keeps me on my game, meeting new people, new long-term clients, and it keeps me in check about reality versus what's sensationalized in the media (you know how much I love the media).
Which is what brought me to writing this post - it feels like the downtown rental market has calmed down recently. At least a bit.
Now I'm not talking about rents coming down or that it's any less expensive or competitive to rent in the core, but if you were trying to rent in the core about 6-9 months ago, you'll likely remember the constant bidding wars and absolutely mad rush to rent anything you could. Maybe it's a function of the season (late summer is always a nightmare trying to rent because of the huge influx of students settling in before the fall) but I do rentals all year round and this year, well, it's felt calmer so far.
That got me thinking. What's changed?
Are fewer people moving to the city? That's not it. Are people just giving up on moving downtown? Can't be it either. Are people not working downtown as much? Nope. The opposite in fact.
Demand hasn't let up. It's the supply that's seen a short-term boost.
Over the last 6-9 months, there have been at least 3 or 4 large, newly completed condo towers right smack in the downtown core bringing literally hundreds of fresh rental units to the market all at the same time. I've seen it with my own eyes. I've brought clients to these buildings and shown them 5-6 vacant, ready to occupy units in each building.
With a vacancy rate in the core under 1%, these new buildings have brought a much-needed reprise from the shortage of rental inventory.
What has that done? It's pulled (at least some) demand from existing buildings, moderating the rapid rise in rental rates. For now.
In the summer of 2018, if you showed me a 1-bedroom condo listed for under $2000/mo, I would bet it would be gone in a day. And while sub-$2000/mo 1-bedroom units are still extremely rare, they can actually be found. Got a budget of $2100/mo? I can show you even more options.
See, most of these new condo projects were bought by investors 3, 4, or 5 years ago. Once they get occupancy, they hit the rental market immediately. And with some of these projects boasting 300+ units, it's a much needed influx of supply. That also kills any pricing power a landlord would have in the building, bringing rents down in the short-term. The effect is not limited to just these buildings. Every building nearby would feel the effect too as they are now competing with a fresh batch of units.
Let's look at a few examples:
Axiom Condos (460 Adelaide St E): 525 units on the east side near St Lawrence Market. The owners here got occupancy around the summer of 2018. Since then, 178 units have been leased and there are still 27 units available for rent.
87 Peter (I still call it Noir, which is what it was originally marketed as): 550 units in the Entertainment District. Owners here also got occupancy in the summer of 2018. Since then, 300 units have been leased. 300! And there are still 43 units available.
Grid (181 Dundas St E): 528 units at Dundas and Jarvis, steps to Ryerson. Occupancy started early 2019. In that short time, 76 units have been leased and there are a whopping 132 units still available. Keep in mind, this building still isn't finished so owners on the higher floors haven't received their keys yet, so expect even more units to hit the market in the coming weeks.
Monde (12 Bonnycastle St): 516 units, down by Queens Quay E and Sherbourne. Occupancy started a few weeks ago and 16 units have been leased already, with 29 available and many more to come as units occupy in the next several weeks.
The Harlowe (608 Richmond St W): 210 units, steps to Queen and Bathurst. Occupancy started in the summer of 2018 and 75 units have been leased, with just 1 available on MLS (although there are several still available not being advertised on MLS).
Ten York (10 York St): 725 units, in the South Financial Core. Occupancy started summer of 2018 and 44 units have been leased so far, with 10 available on MLS. This building has restrictions on who is allowed to list properties for lease, as it's still not registered and several units are not yet ready. Expect several units to hit the rental market in the coming months.
Casa III (50 Charles St): 618 units, close to Yonge/Bloor. Occupancy started early 2018 and 239 units have been leased, with 19 still available as the building nears full completion.
Maybe we should look at prices. After all, what good is supply if it doesn't affect prices, right?
I think it's safe to use $2100/mo as a benchmark for 1-bed units, because when the average 1-bed condo hit $2100/mo last year, the media went nuts.
So how many 1-bed units in these buildings rented for under $2100/mo so far?
Axiom: 36 87 Peter: 30 Grid: 53 Monde: 9 Harlowe: 27
Ten York: 0 Casa III: 56
Now I know you can make numbers say whatever you want but as someone who is on the ground in the rental market every day, I can tell you that the pressure seems to be letting up. At least a little. And with more buildings starting occupancy in 2019 and into 2020, I can only assume that the intense rental craziness we saw in 2017 and 2018 probably won't be quite as intense this year. Or I could be wrong.
Here's what's coming to the rental market in the near future off the top of my head:
The Britt Condos (955 Bay St): 729 units (occupying as we speak)
Massey Tower (197 Yonge St): 699 units (occupancy starting soon)
East United (95 Berkeley St): 330 units (occupancy late 2019) YC Condos (460 Yonge St): 600 units (occupancy late 2019)
King Blue (355 King St W): 872 units (occupancy 2020) Daniels Waterfront (130 Queens Quay E): 860 units (occupancy mid 2020)
Dundas Square Gardens (200 Dundas St E): 968 units (occupancy 2020)
And there's certainly more I haven't mentioned, spread throughout the core and beyond.
A sign of relief for the rental market? Time will tell.
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