Urbanation Inc. released its Q3-2025 rental market report, revealing a notable uptick in GTHA purpose-built rental construction amid a stalled condominium sector. As developers pivot away from condos, the region is seeing a surge in rental-focused development—but it may not be enough to close the growing supply gap.
“With the condo market effectively on pause, developers have turned their attention towards purpose-built rentals,” said Shaun Hildebrand, President, Urbanation Inc. “While it’s encouraging to see more rental projects getting underway, the level of rental construction activity in the GTHA is trailing behind other parts of the country and will not be enough to offset the supply shortage left behind by a lack of condo development.”
According to the report, 1,798 purpose-built rental units broke ground in the third quarter, marking a 25 per cent increase from the same period last year. Year-to-date, rental starts have reached 5,475 units, up 32 per cent from 2024 and the highest level since 2021. Currently, 24,893 rental units are under construction across the GTHA—the most in over five decades. Additionally, 50 new rental projects totaling 18,570 units have submitted development applications this year, a 69 per cent year-over-year increase.
Data shows that a significant shift has also occurred in the condo sector. 61 projects representing 27,320 units have converted from condo to rental applications in 2025, alongside nine cancelled condo projects (1,778 units) that have also transitioned to rental.
Despite this momentum, market conditions remain challenging. The vacancy rate for stabilized purpose-built rentals completed since 2000 rose to 3.5 per cent. in Q3-2025, up from 2.8 per cent a year ago and nearly double the 1.8 per cent rate in 2023. Forty rental projects were in lease-up during the quarter, with more than half having been on the market for over a year.
Rental prices have also softened. Average rents for purpose-built units completed since 2000 fell 2.6 per cent year-over-year to $4.05 per square foot ($2,885 for 712 sq. ft.). When factoring in incentives—such as free rent periods, cash bonuses, and discounted parking—effective rents dropped 6.0 per cent. Incentives were widespread: 63 per cent of buildings offered them, with 33 per cent providing two or more months of free rent, up from just 11 per cent a year ago.
The secondary condo rental market mirrored this trend. Average rents declined 4.5 per cent to $3.85 psf ($2,633 for 684 sq. ft.), down 8.3 per cent from their Q3-2023 peak. Studios saw the steepest drop, falling 6.8 per cent in the past year and 13.7 per cent over two years. In Toronto proper, condo rents averaged $4.02 psf ($2,714 for 675 sq. ft.), a 3.8 per cent annual decline, while the 905 Region saw a 5.7 per cent drop to $3.47 psf ($2,442 for 704 sq. ft.).
