toronto

The Most Over-Saturated Rental Buildings In Toronto

Leasing/Renting

8 minute read

November 11, 2020

It seems we spent more time on Monday’s post talking about how long the readers have been on TRB than actually discussing the level of market saturation that exists in many downtown condos, but that’s okay.  I really, really enjoyed that!  So thank you!

Today, I want to run the same exercise as Monday, but this time for rentals.

Let me tell you a brief story first, and this one is painful.

This story is also going to come off as a bit unclassy to some, since I’m going to talk about a past client, but I’d rather risk coming off as a jerk than not tell the story at all.

A condo owner contacted me in the summer about leasing out her condo.  She was a wreck about it.  The tenant had given her notice for September 1st, and she was afraid she’d have a vacancy!

Oh, by the way, she contacted us like July 2nd.  So she had months to get this place leased.

She was renting the unit for $2,450 per month but we told her that market rent had dropped dramatically, and that she should really put the unit up for $2,295/month.

She disagreed.

We put it up for $2,395, and it sat on the market for five weeks.

Crickets.

In the meantime, we leased a different unit in the building on behalf of a client who understood that the market had changed.

July led to August, and August was going by quickly.

We begged her to re-list at $2,195/month, or less.  But she refused.

“I was getting $2,450/month last year.  I can’t take less than $2,295/month or I won’t be cash flow positive,” she said, as though the market cared about her wishes.

Finally, my colleague was blunt with her on the phone and said the following: “You have three options: 1) You leave it at this price and it literally rots, 2) you sell the condo in a depressed market, 3) you drop the price and get a tenant in there.”

She asked, “What is my fourth option?”

The next day, she emailed us simply, “Please send me a cancellation of listing.”

So we did.

And two days later, she re-listed at the same price with an out-of-area agent.

Ah, right.  We must have been the problem!  Telling her what she didn’t want to hear!

We’re into mid-November now, and her unit is still on the market, and has been vacant for 2 1/2 months.

This is not a rich person.  This is not somebody who owns ten condos.  This is just a very odd individual who, for the life of me, I can’t figure out.

This isn’t any sort of sour grapes or “I told you so,” but rather an illustration in current market dynamics, and the psyche of many of today’s condo investors.

Of course, it could be worse.

In that particular building, there were about five or six units for lease at any given time, and most of them have been absorbed.

But which buildings have the most rentals?

Here are the top five…

#1: 20 Richardson Street, aka “Lighthouse Tower”

74 units for rent
300 unit building
24.7%

One-quarter of this building is currently for lease.

Is that insane, or what?

Or perhaps it’s just expected since this is how “investing” in pre-construction condos goes.

Those of you that know me and have read this blog long enough are aware of my feelings about pre-construction condos.  I won’t launch into the full diatribe now, but suffice it to say, the time between “occupancy” and “registration” is a massive unknown for investors.  As a pre-construction buyer, you are contractually obligated to take possession whenever the developer says so, essentially when they deem your unit is complete.  The rest of the building can be like a warzone, but when your unit is ready, they hand you the keys, and wish you well.  Once upon a time, developers wouldn’t let you rent out your unit during “occupancy,” which can last two years in some cases.  You can just imagine the monthly bleed from a cash flow perspective.

So when a building is in “occupancy,” it’s not uncommon for units to flood the lease market.

20 Richardson Street is exactly that.

What can you do, as a landlord, in this situation?  As an investor?  As a person who is so nervous, they’re going to bite past the nails and right into the fingers themselves?

Let’s say that you have a bachelor condo, currently in “occupancy,” and you’re looking for a tenant.  Well, in today’s market, this is your competition:

Don’t get me started on the mistakes above, ie. “common elements condo,” or the “multi-level,” which these units are not.  The listing agents calling these “1-bedroom when they’re not.  I don’t know what “other” is supposed to be either.

In any event, these are all essentially the same model suites, and there are seventeen of them, ranging in price from $1,400 to $1,650.

What can you do, as a landlord/investor/owner?

Wait.

Reduce.

Pray.

Or, go back in time and avoid this “investment” to begin with.  I know that seems unfair, given the pandemic has crushed the rental market, but there are many reasons why I have never sold a pre-construction condo in my sixteen years in the business, and the risk of a vacancy during occupancy is merely one of them.

These owners can opt to lease for $1,200 to mitigate mounting vacancy losses, or, if they’re investors who declare a capital gain on the purchase/sale of the asset, they can write off lost rent against the gain itself.

Either way, this building is atop our list.  And its cousin will make an appearance shortly…

#2: 28 Wellesley Street East, aka “VOX Condos”

59 units for rent
337 unit building
17.5%

That’s it?

A mere 17.5% is number-two on our list?  We couldn’t find a second property to pass that twenty percent threshold?

Apparently, not!

But fifty-nine units for lease in the same building still has to be considered a big number, right?

28 Wellesley Street is a Cresford Developments building, completed in 2017 but registered in August of 2018.  Unlike the building above, which is in “occupancy,” and for which we understand the flood of lease listings, 28 Wellesley Street is well past occupancy.

Why all the lease listings?

My two cents: the units are primarily owned by investors.

See that red brick building next door to VOX in the photo above?  Do you know what that is?  It’s the Wellesley TTC subway station!

And what is one of the features in Toronto that is most marketed toward pre-construction condo investors?

Proximity to the subway.

I don’t think it’s a stretch to suggest that this new condo, built steps from the TTC, was primarily targeted by, and for, investors.  And investors buy condos to rent out.  So when a pandemic hits, renters default, give notice, or simply move out in the middle of the night, it’s buildings like VOX that are going to show up on MLS with a slew of new listings for lease, each and every day.

Unlike 20 Richardson street above, at least 28 Wellesley Street has a location that’s steps to both TTC as well as a thriving commercial/retail strip like Yonge Street.

#3: 15 Grenville Street, aka “Karma Condos”

65 units for rent
495 units in building
13.1%

As you can see from the photo above, that new condo is jammed in between two old condos, and one condo still under construction.

Welcome to downtown Toronto!

It’s absolutely amazing to see where, and from what, builders can construct 50-storey towers.  Look at the little Victorian house to the left of 15 Grenville Street.  It’s a mere footnote, but once upon a time, that was every property in the downtown core.

There’s something so fascinating about this juxtaposition in my mind.  A late-1800’s, 3-storey, red and yellow brick Victorian standing immediately next to a 2016-built, 50-storey glass-and-concrete structure.

As for the condo itself, I haven’t been inside yet.  I’ve been in most, but I’ve never had an occasion to visit here, even through four years.

I go where the business goes, and I also provide my opinion, which should come as no surprise.  In sixteen years, I’ve had many listings in the Bay Street corridor, but I can’t recall putting a single buyer in here.

Why?

Well, reason-number-one would be the demographic and ownership, and this is exactly what we’re talking about today.  Most of these condos are littered with tenants, and in my experience, condo buyers don’t want to live in dorms.

Proximity to U of T makes buildings in the Bay Street corridor ripe targets for wealthy students, especially shiny, new buildings!

So am I surprised that 13.1% of this building is up for lease?  Not at all…

#4: 15 Lower Jarvis, aka “Lighthouse West Tower”

61 units for rent
516 units in building
11.8%

Deja-vu!

This is the sister building to 20 Richardson Street, both in that splendid location between the Gardiner Expressway and Queen’s Quay, with Lakeshore Boulevard underneath it all.  Mmmmm!

Is it any wonder these units are proving difficult to lease?

#5: 12 & 16 Bonnycastle Street, aka “Monde Condominiums”

60 units for rent
567 units in building
11.0%

This building is called “Monde,” which is French for “world.”

As in, “why in the world would you live at 20 Richardson Street or 15 Lower Jarvis when you can live at 12 & 16 Bonnycastle?”

This building also has a splendid view of the Gardiner, Lakeshore, and whatever industrial buildings are left down there that have yet to be turned into condos.

Great Gulf Homes finished this project in 2018, it was registered in 2019, and just like the other buildings on this list, it’s full of investors.

I have never shown in this building and I probably won’t.  I have no idea why somebody would buy a resale condo in here, and for those investors reading this, upset that I’m not glowing about your building, be honest and ask yourself: if you were a 20-something and you had all the areas in the city to choose from, would you really choose to live down here?

At a cost, maybe.  But these aren’t cheap!  They’re far more expensive than 15-year-old buildings in A++ locations like King’s Court in the St. Lawrence Market area, or The Hudson in prime King West.

So I’m not surprised that this building rounds out the top five, and I’m sure if we ran this same feature in early-2021, this would be near the top of the list then as well.

Folks, today is Remembrance Day, and I’d be remiss if I didn’t chime in.

When I was in school as a child, we would stand for that “moment of silence” every year.

As an adult, we no longer do that.  Maybe your workplace does, but I’m guessing few do.

As with everything else in life and society today, so many positives have been questioned, protested, and turned into negatives.  The whole “white poppy” movement is something I don’t understand.  I understand being anti-war, but a red poppy isn’t pro war.  It’s not celebrating war.  Going to war wasn’t a choice.  And thus the poppy isn’t a proud symbol of war, but rather a proud way of saying thanks and paying respect to Canadians who did serve, many of whom died for our freedom.

Died for our freedom.

We heard that a lot growing up, and didn’t really make sense of it.  The words have been used so many times that they almost sound worn-out and cliche.

My daughter is 4-years-old and she asked me what my “red flower” was.  I told her it was a poppy, and told her that we wear it to pay respect to people who died for our freedom, but the concept of death isn’t familiar to her.  She has no idea what it means.

But neither does a new generation of society who can’t understand the concept of true war in a global sense.

If these brave men and women didn’t die for us, what would 2020 be like?

There’s an Instagram account I follow called @leaside_heritage

All week, they’ve been profiling young men who lived in Leaside and went to war, never coming back.

Here’s an example:

Robert Eric Bowman Pike: Robert Pike was born in Toronto on June 2, 1923. He lived in Leaside at 49 Cameron Cres. and attended North Toronto Collegiate from 1937-1942. He enlisted in the RCAF April/May 1942 and trained as a pilot before being sent to Europe. On Nov. 2, 1944, the Halifax bomber he was piloting was shot down returning from air operations against targets in Dusseldorf, Germany. Pike and his six crew members — including fellow Leasider, Vernon Lazier of 29 Heather Rd — were all killed. He was 21 years of age.

This is just so real.  They even have the home addresses of these men.

To think, I used to trick-or-treat at these houses in the 1980’s, and a little more than a generation earlier, these houses were home to parents who lost a child at war.

This puts Remembrance Day in perspective for me.

The “moment of silence” never did much for kids being forced to stand at attention at 11:00am in their public schools every year.

But to see a story like the one above?  To really think about the idea of men and women that you knew, heading overseas, and never coming home, so that we could enjoy the freedom that we have in life today, is what Remembrance Day is all about.

One moment.  One thought.  Just one acknowledgment of what could have been, if not for these men and women, and what did happen to 61,000 Canadians in WW1 and 45,000 Canadians in WW2, is all that’s required by all of us for this day to have meaning.

Simply by reading this, and absorbing the sentiments, you’re doing your part.

Thank You.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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13 Comments

  1. Bal

    at 7:50 am

    Salute to all brave souls

    My Grandfather and uncle were in military……..even though they are always in my heart….but i really think about them on this day

  2. Sirgruper

    at 8:30 am

    Some pre-registration condos still don’t allow rental unless through their management company. Also, why take the loss against capital gain vs income? Didn’t get that. I think you nailed it on Remembrance Day. Thanks

    1. J

      at 10:03 am

      Yeah, I don’t understand the point about being able to reduce capital gains by lost rent either. Assuming the property is deemed to be a capital investment, the eventual gain or loss can only be reduced by capital expenditures. You wouldn’t report rent you don’t receive as income, but the benefit, if you can call it that, ends there.

      https://www.youtube.com/watch?v=BAjxn2US7J8

  3. Appraiser

    at 9:32 am

    My father was also in the RCAF and trained as a pilot in Canada, eventually becoming a flight instructor. He survived the war, as did his two brothers. I never met anyone who hated war more than my dad. He told me many times that there is no glory in war, only suffering.

    To my father, war was the greatest failure of society. I agree.

    Let us remember that today and every day.

    1. Bal

      at 10:53 am

      Agreed with Appriser….

      1. Condodweller

        at 8:47 pm

        Yes, someone needs to remind leaders of countries that like to start wars to remember. It’s unfortunate that so many soldiers need to lose their lives, and what’s also unfortunate is how all the innocent people of all ages/genders lose their lives where the war is. Fortunately, we haven’t had to experience war on Canadian soil in modern times.

    2. David Fleming

      at 9:52 am

      The entire course of my grandfather’s life was altered by the war.

      He had two massive tattoos on his forearms: one of a ship and one of a flag.

      He ran a concrete business and wore a dress-shirt most days. He wore long-sleeve shirts on 40-degree days in the summer, ashamed of his tattoos and what they represented.

      My father describes my grandfather as a “nasty son of a bitch.” He was hard on his kids. Maybe that was how things were done back then, or maybe it was because of his experiences in the war. I only knew my grandfather as the kind old man who would buy me GI Joes and Transformers, and who’s home I would go to every weekend for a swim and some chocolate cake. But in the forty years after the war and before I was his grandson? I’m told by my father and my uncle that he was nasty.

      I want to remember my grandfather as the man who forged his birth certificate at age 17 to say he was old enough to fight for his country, as well as the amazing, gentle, caring man who I idolized until he passed away when I was 10-years-old. But the reality of what war did to my grandfather is something I can’t ignore now that I’m old enough to understand it.

  4. TokyoTuds

    at 12:30 pm

    Nice Remembrance Day comments …. my father was a sailor in the RCN and their ship was torpedoed and although he survived, nine of his mates did not. Lest we forget.

  5. Condodweller

    at 9:14 pm

    I would not be overly concerned with too many units up for lease in a brand new building. I was a bit worried when I took possession but in a desirable building the market soaked up all the units in no time. My tenant couldn’t wait to get in and even paid prorated rent up to the 1st of the month from the day I took possession.

    I know agents love to tell clients to just keep dropping the price/lease until it’s sold/rented but I mean if you’re not desperate it might make sense to hold off until others lease out their units at the low end, and then hopefully you can get more. Unless of course, new units keep coming on the market at lower rents but even so.

    Especially now with the new strict rules how it’s impossible to evict a tenant why lock-in at t low price and lock it in for a potentially long time when if you are patient and wait it out you might get a higher rent again. If you drop your rent by $200 that’s about a month’s rent. Each year you’d lose a month’s rent if you lock in at the low and the tenant stays. The lower the rent the more likely your tenant will hang around for a long time.

    Each situation is different but I think as the saying goes patience is a virtue. Looking at my building some units have leased recently not too far below the highwater mark. Some at the same as prior leases and some even higher. Yes, a couple are listed $300 lower than the previous lease since July but that could be a specific issue.

    1. Sirgruper

      at 12:23 am

      Agreed. Better to charge full rent and give a free months rent so you are not stuck rent control wise.

  6. Yanni

    at 6:44 pm

    The youth these days doesn’t understand much to be honest. They have a great understanding of technology, social media, and designer brands. But, I’m talking about understanding life, sacrifice, integrity and all that good stuff. Between sending today’s youth to war and just forfeiting our freedoms, we should just forfeit to avoid further embarrassment. That said, this doesn’t apply to the entirety of today’s youth. There are still some stand up ones with morals and true understanding of life. Let’s hope they’ll be the ones leading the future. But what do I know?

  7. Sylvia Kerr

    at 10:57 am

    Thank you for posting this article. BTW, I live in Leaside and I’m told the street I live in is named after a WW2 vet. I’m also told the surrounding area was a major WW2 aircraft refueling site. Aerodrome Crescent another street in the community is named in recognition of the area’s important place in Canada’s war defence history. (Mmmm, just thinking; should I factor sentimental value into the ask price if /when I list my home? LOL). Lovely area to live regardless.

Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

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