Renderings of Fitzrovia Real Estate Inc.'s Elm-Ledbury project in downtown Toronto.Fitzrovia Real Estate Inc.
Developers of new purpose-built rental buildings are discovering that, unlike the whispered promise from the movie Field of Dreams, just because you build it, renters don’t necessarily come.
Owners of recently completed rental projects in the Greater Toronto Area are finding it’s taking longer than ever to “lease up” empty buildings – a level generally considered to be 95 per cent rented.
“The GTHA had 19 purpose-built rental buildings that have been in lease-up for 12 months or longer, including 11 projects longer than 18 months and seven projects longer than 24 months. There were even a few that entered into year three. Those are all highs compared to the past decade of tracking of this,” said Shaun Hildebrand, president of real estate analysis company Urbanation Inc.
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Most industry experts agree that demand from tenants has weakened at the same time as new supply has increased. The result is falling rental rates. According to market analyst Rentals.ca, in September the average rent fell 3.2 per cent to $2,123 across Canada compared to same month the year before. In Toronto, it fell 2.4 per cent with average rents still among the most expensive in the country at $2,608. Inside those averages, some rental categories are struggling more than others. In Toronto, the asking rents for one-bedroom apartments were down 5 per cent in September, but over the past year, rents fell further for two- and three-bedroom units, which were down 10 and 8 per cent respectively.
Despite that, according to Rentals.ca, the asking rents for purpose-built rentals (PBR) are up 18 per cent over the last three years, significantly higher than the 3.3 per cent growth in the same period for condos and the 0.6 per cent drop for houses and townhouses. According to Urbanation the price per square foot for Toronto-area PBR buildings in lease-up is $4.25, which is almost a dollar more than the existing PBR market ($3.39) and 12 per cent higher than condo rentals ($3.79): that difference could make the rent for a 640-square-foot, one-bed PBR apartment almost $300 more than the same sized condo apartment (and almost $600 more than an older PBR).
Fitzrovia Real Estate Inc. CEO Adrian Rocca says that while some of the developer's buildings, such as the Elm-Ledbury project, are pushing beyond the 18-month lease-up mark, that wasn’t unexpected.Fitzrovia Real Estate Inc.
The simple answer – lowering rents – isn’t always economically possible for landlords because of the still-rising costs of land, construction and other development-related fees to build new units.
“It’s a challenge for developers to reduce rents as the investments made in these projects are so substantial,” said Mr. Hildebrand. “Also, if you lower rents for remaining units in your building, existing tenants will want the same and the declines will spread throughout.”
“To be fair, a lot of them have pretty spectacular amenities and suites to help justify their rents. However, the pool of demand for units $3,000-plus per month only grows by so much each year when the economy is slowing as it has been.”
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The solution most landlords are turning to is temporary incentives – mainly monetary. According to Urbanation, a free month of rent is the No. 1 incentive being offered (at 36 per cent share of the market) followed by two-months rent (24 per cent) and a cash move-in bonus (11 per cent).
According to Sarah Segal, CEO of research firm Simplydbs Inc., landlords should think twice about their approach and put some more permanent incentives front and centre. Ms. Segal said when her company compiled its 2025 Canadian Multi-Residential Satisfaction Study (with 30,000 respondents) they found that the decisions on where to rent were multilayered, but when it came to incentives, there was a key divide between one-time or temporary rental incentives and longer-term value-adds.
“The top four most preferred incentives are rent discounts, free rent, free parking or free storage – they all hovered around 90 per cent,” of those surveyed, she said. However, when it came to what would be a deal-maker to clinch a decision to lease, free parking leaped into the lead at 42 per cent; free storage was second at 30 per cent. The temporary incentive of one-month free rent fell to 22 per cent (a lease-long rental discount hit about 27 per cent approval).
According to Urbanation, only about 5 per cent of the current lease-ups in the Toronto region are offering free parking or lockers.
Ms. Segal also said her data shows incentives of any kind are still relatively new to most renters. “We asked, ‘Were you offered an incentive in your leasing pathway?’ And just under half [of all respondents] said yes, 42 per cent. When we asked by year for those that moved in 2023 it was zero per cent, in 2024 and 2025 it went from 30 per cent to just over half.”
Rental owners are also turning to experts in condo marketing to see if the techniques that helped sell all those preconstruction units in the boom years can be applied to lease-ups.
“The typical purpose-built-rental firm for the past 30 years didn’t need to think outside the box for leasing; you were leasing out your building in 12 months,” said Riz Dhanji, president of RAD Marketing.
“On the actual marketing side [for rental buildings], we’ve stepped up the level of quality; from social media to direct mail to websites; all the little things we use in the condo side,” he said. “Not a lot of [purpose-built-rental] firms have used the real estate agent community to lease-up; We’re doing various events with agents who have clients that usually lease out to the condominium sector, we’re trying to educate them that there’s a higher level of rental product for very similar rates to a condominium.”
There are other value-adds beyond cash incentives that work to attract renters to PBR, according to Mr. Dhanji. For example such security features as 24-7 staffing of concierge or security in a professionally managed rental building can lure people away from the sometimes cheaper condo rental offering. “Some condos right now only have eight-hour concierge or only video concierge,” he said.
Another factor in the slowdown among lease-up periods may simply be the scale of some of the newer rental projects. According to Urbanation, in the first half of 2025, there were 3,156 new purpose-built apartments completed, those completions were 77 per cent higher than the same period the year before.
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“There’s a ton of supply that’s coming on the market. … There’s only so much absorption you can take on,” said Adrian Rocca, CEO of Fitzrovia Real Estate Inc., one of the largest builders of new rental in the GTA, with more than 9,000 units under management or under construction. Mr. Rocca said that while some of the buildings in Fitzrovia’s portfolio are pushing beyond the 18-month lease-up mark, that wasn’t unexpected. “We have Elm-Ledbury [at Queen and Church in Toronto] that’s 542 units; that would be pushing beyond 12 months in a tighter market; it would take longer than 18 months.” he said, emphasizing that it’s far from a tight rental market today.
The slowdown in demand and rental rates may also be keeping new rental supply on the sidelines, according to an August Urbanation rental market update.
“There are currently more than 200,000 purpose-built rental units in the planning stages that have been held back from proceeding as they await approvals and for economic feasibility to improve,” the report said. “At year-end 2024, the GTA had the lowest number of per capita purpose-built rentals under construction among Canada’s six largest centres.”
Editor’s note: A previous version of this article incorrectly referred to the 2025 Canadian Multi-Residential Satisfaction Study as the 2025 National Housing Survey.