Mirabella Corp. president and CEO Julie Di Lorenzo is reminded, as the new condo market in 2026 shakes out, of the situation in 1994 when her first project was built on Yonge Street.Sammy Kogan/The Globe and Mail
At some point this year, says developer Julie Di Lorenzo, president and CEO of Mirabella Corp., she will “probably” begin marketing preconstruction condos in her long-planned luxury project, The Florian 2, located in Yorkville, on Davenport Road near Bay Street.
This venture is not Ms. Di Lorenzo’s first rodeo.
She’s constructed condo and rental buildings in several prime locations in downtown Toronto, including one near City Hall, as well as the original Florian, which got started just before the 2008 financial crisis. Her very first building, at Yonge Street and Balmoral Avenue, dates to 1994, when developers essentially hand-sold condos to end-users – one unit at a time, over coffee – while they fought the city’s planning division over- six or seven-storey projects.
What makes her latest condo noteworthy is that it’s launching at all. In a region with a glut of newly completed but unsold one-bedroom apartments, where prices are still in free fall, new home sales have dropped to historic lows and mom-and-pop investors have gone to ground, the mere fact that a builder is going out to market seems almost miraculous.
For Ms. Di Lorenzo, there’s a bit of déjà vu going on: “In 1994, there was no momentum. There was this crushing recession, the commercial real estate [was] taking it in the teeth. You have a half-baked intensification policy. When you looked around, you said to yourself, ‘Okay, what do we have at our backs?’”
It’s a riddle that haunts many Greater Toronto and Hamilton area (GTHA) condo builders in 2026 as they cancel, pause or convert approved projects because there’s currently no way to sell enough, or indeed any, preconstruction units. It was the down-payments on preconstruction units that fuelled the condo boom that turned into a bust.
To get a glimpse of what the future may hold and where the green shoots of a recovery may germinate, The Globe and Mail asked industry experts for their predictions on some core questions: Where will we see the first new condo projects? What form will they take? Will the industry’s speculative financing model – preselling about 70 to 75 per cent of units in a project – survive? And how long before the recovery gains traction?
Location, location, location
Unlike the mid-1990s, when the current boom began, large tracts of the city and the region are now zoned for medium- and high-density development – on big-box malls, along arterials and major streets, at brownfield sites, around rapid transit stations and even on the parking lots of destination shopping centres like Yorkdale.
The experts we talked to had a range of views on which were most amenable for new condo projects. Some expect to see the first wave of buildings to land on smaller sites in the core or near transit, their locations acknowledging that a growing number of employers have now cancelled or significantly restricted their remote work policies.
Others predict that developers will mitigate risk by focusing on discrete infill sites, as compared to multiphase redevelopment proposals for sprawling mall properties, in areas such as the Golden Mile, where the city approved 45,000 units in anticipation of the Eglinton Crosstown LRT. “It can only go one-offs,” says planner Frank Lewinberg, one of the founding partners of Urban Strategies. “It’s the only way.”
Fred Cassano, auditor PwC Canada’s national real estate leader, anticipates early movers to take an even more surgical approach, targeting distressed properties (i.e., coming out of receiverships) in areas already fitted-out with infrastructure. “You’ll find that most sites will be in the urban periphery, in relatively affordable areas that are well connected to transit,” adds Shaun Hildebrand, president of Urbanation, a real estate market data firm.
Planner Ken Greenberg disagrees. He anticipates that the post-crash wave of projects will be located in parts of the city rich in urban amenities. “There will be much more of an emphasis on neighbourhood and public spaces and walkability, access to transit, access to schools, daycare, community centres, libraries, all those things,” he says. “That’s why I think downtown sites, which already have that, will probably be doing better.”
Form and market segment
The site of The Florian 2 luxury condo project, in Toronto’s Yorkvilled neighbourhood, which will likely begin to be marketed this year.Sammy Kogan/The Globe and Mail
Ms. Di Lorenzo isn’t the only builder out there selling new projects aimed at affluent, downsizing baby boomers. “You’ll notice there’s a proliferation of luxury products,” she says. “All of a sudden, there are lots of over $2,000-a-square-foot projects.”
Mr. Hildebrand points out that larger non-luxury units – those in the 900-sq.-ft-plus range – have retained most of their value as the market has tanked, whereas prices for those units in the under 600-sq.-ft segment are now off by 20 per cent. “The undersupply [of larger apartments] will drive product design in the next cycle, with much more emphasis on the end-user experience.”
So, too, will the boom in new rentals, which are being financed by institutional investors. “As purpose-built rental replaces some of the investor-driven condo supply,” says Mr. Hildebrand, “there will be a natural gravitation from developers towards premium product, extracting the highest possible values while also keeping project scales modest to limit absorption risk,” i.e., getting stuck with units that won’t sell.
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Some also anticipate that developers won’t be maximizing all the allowable density approved by the city in the past six years. “We have projects being built that are not using their full permission,” says former chief planner Jennifer Keesmaat, president and CEO of Collecdev Markee, adding that her firm is actually going in the other direction with a pair of its new missing-middle rental projects, adding units and height in response to market demand.
While Ms. Keesmaat says there will always be an appetite for high-rise living in the city, industry watchers predict the initial wave of new condo projects will be smaller, both in terms of number of units and height. “In order to help maybe mitigate the risk,” says Mr. Cassano, “instead of seven to 10 years [to build] a 60-storey [tower], we’re going to start seeing 18 storeys, because we could do it in three years.”
Mr. Lewinberg recalls that in the uncertain early 1990s, some builders pushed ahead with low-risk townhouse projects on sites that could support much larger towers. Adds Ms. Di Lorenzo, “There’s no question that people will write down their land and start to look at different built form if they have the ability to do it.”
The financing model
The past few decades have seen new condo buildings in Toronto approved for construction based on a presale model aimed at investors.Fred Lum/The Globe and Mail
For decades, condo builders and Canadian lenders relied on a financing model designed to attract small investors. They presold about three-quarters of the units in a building and used the deposits to secure construction loans, which would be paid off as soon as the building was completed and transferred to the condo corporation and the owner/investors.
Mr. Greenberg says this approach, which has come under criticism for fostering a speculation-driven market dominated by investors, was imported to Toronto in the 1980s by a local lawyer who’d seen it in action in Hong Kong and applied it to early Harbourfront projects.
By contrast, condo ventures are financed more conventionally in Europe, i.e., with the builder relying on deeper reserves of equity to secure larger mortgages. In the U.S., in turn, federal mortgage insurance rules cap the number of investor-owned units in a given project – a regulation that has limited condo development in many larger urban markets.
“My contention is that this idea was fatally flawed from the start – that what it did lead to, in fact, was a speculative market for investors, instead of people who would actually live in the units,” says Mr. Greenberg. A growing number of industry players concede the point – an acknowledgment that, at a time when it has become almost impossible to presell a condo, this particular financing model has brought the sector to its knees.
Institutional capital, on the other hand, is flowing into large new rental projects, which require developers to stake a lot more equity and accept a longer payback period with lower returns. A popular Canada Mortgage and Housing Corp. (CMHC) rental subsidy program has prompted many builders to convert planned condos into rental ventures in order to secure such funding.
Mr. Cassano and others say that CMHC programs geared at non-profit housing providers such as WoodGreen have created a third option, with condo developers establishing joint ventures as a means of accessing the CMHC funding. “These other organizations,” says Mr. Cassano, “can tap into incentives that the developer wouldn’t otherwise have.”
In Vancouver, meanwhile, a growing number of projects are being financed through a new vehicle known as a “real estate development trust.” These are like REITs in that they’re available to smaller retail investors, but raise capital to finance new projects, as opposed to acquiring completed ones as REITs do. Last May, for example, Anthem Properties Group, a B.C. firm, raised $82-million for a 66-storey tower in Burnaby that will have 372 condos, 200 market rental units, 73 non-market rental units and 176 hotel suites.
Regardless of the financing model, says Mr. Hildebrand, “investors will come back to the market. Condos have been a time-tested investment that has created a critical mass of investors who own approximately half of all units in the market. Many are waiting to get back in and will be opportunistic when the time comes.”
When will the time come?
Building industry lobbyists have argued for years that policy changes, such as reductions in development charges that can add substantially to the purchase price, are the necessary precondition for condo investors to come out of hiding. Land economists, meanwhile, say nothing much will happen until the tens of thousands of newly completed but empty condos are “absorbed” – that is, sold to investors waiting for prices to fall even further.
The conundrum for condo builders is that they can’t start marketing new projects until all that surplus “inventory” is acquired, which means there’s likely to be a several-year-long period in the near future when little is being built and nothing is being sold. “By 2029,” says Mr. Hildebrand, “there will be virtually no new condo supply entering the market.”
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How long will the doldrums last? That question dominates industry conferences and the real estate bro podcasts that, not long ago, featured excited conversations about how to goose returns by flipping preconstruction condos.
“I would say three to five years,” says Mr. Cassano. “I know that there are people in industry saying, `Nah, this is 18 months.’ I just don’t see it.”
Ms. Keesmaat agrees: “However long people think this is going to take,” she adds, “it’s going to take longer.”
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