Large landlords are increasing incentives to attract new renters after the COVID-19 epidemic crushed demand for rental housing – a sharp change from before the crisis.
The eCentral building in downtown Toronto, owned by RioCan REIT, offers one month’s rent free for certain units. West Toronto building distributes $ 1,000 Visa Prepaid Cards to new tenants. And the Grid 5 Apartments in downtown Calgary, owned by Killam Apartment REIT, are handing out $ 1,000 signing bonuses.
It is not unusual for large homeowners to offer incentives to generate interest. However, the pandemic has brought out a higher level of competition to attract a lower flow of tenants, including in Toronto and Vancouver, where incentives are rarely needed.
“Once the incentives start, they become common, as rental providers have to compete more, and eventually tenants start to wait for them,” said Shaun Hildebrand, president of real estate consultancy firm Urbanation.
For years before the pandemic, rental demand was so overwhelming and purpose-built buildings so sparse that finding an apartment in many urban centers was practically a blood sport, with queues. giants, occasional bidding wars and rising rates.
Ultimately, the developers sought to capitalize. According to the Canada Mortgage and Housing Corporation, more than 50,000 purpose-built rental units were completed across the country in 2019, the highest total in decades. Much more supply is on the way.
But since COVID-19 hit Canada, rental demand has come under criticism over immigration restrictions, distance learning at universities, and rampant job losses that have affected household finances. With virus cases on the rise again, it is uncertain whether demand will fully rebound.
Park Property Management, which has approximately 8,750 units in 72 buildings across Ontario, offers incentives in Toronto and places where student demand has dried up, such as Waterloo. The incentives are “new” for the company, said Senior Vice President Margaret Herd, with one month’s free rent being a joint offer.
“People are shopping now,” Ms. Herd said. “It’s like when you get a sale on a car.”
The Toronto market is undergoing massive upheaval. Of 50 purpose-built apartment complexes in the city tracked by Urbanation, 29 offered incentives in the third quarter. This includes free parking, one or two months of free rent, and move-in bonuses of up to $ 1,500.
“I would say it’s been over 10 years since we’ve seen any significant level incentives in Toronto,” said Hildebrand.
Another factor in Toronto, Ms. Herd said, is that tightening restrictions on short-term rentals (like Airbnb) are forcing some investors to find long-term tenants, contributing to a recent surge in supply in the region. city.
“If you want to live in the city center, there are a lot of [of units] available, ”she said.
In Alberta, rental demand has been lukewarm for years due to the weak economy, and the market is no stranger to incentives. Yet the pandemic has added another complication, forcing many homeowners to increase their offerings.
The province has “seen discounts and incentives pretty much everywhere, and we’ve certainly taken the same approach to stay competitive,” Michael Waters, managing director of Minto Apartment REIT, said during an earnings call in August.
The company’s website shows three buildings in Edmonton that offer three months of zero rent. A Minto spokesperson said that depending on the property and market conditions, signing bonuses are offered for lease renewals.
Boardwalk REIT, which has strong exposure to Alberta and Saskatchewan, has “selectively increased the use of incentives for new rentals during the pandemic to increase our occupancy rate,” CEO Sam Kolias said at ‘a call for results last month.
Killam Apartment REIT “probably still offers incentives in some markets,” Executive Vice President Robert Richardson said via email. The Company is offering tenants a partial or full month’s rent free at a number of properties in Alberta and Newfoundland and Labrador. “Today’s energy-dependent economies are not as strong as in previous years,” he said.
For homeowners, there are other headwinds. The Ontario government announced last week that it plans to freeze residential rents in 2021 (they were supposed to increase 1.5%, as rent control guidelines dictate.) REIT actions of apartments fell on the news, adding to already substantial losses. in 2020.
For tenants, the situation is a rare reprieve. Several rental sites have released data showing monthly rates are falling, offsetting some of the massive gains many markets have seen over the past decade.
Yet beyond the pandemic, tight markets such as Toronto will continue to face insufficient supply, while higher demand will reduce the need to offer incentives.
“We are experiencing a temporary easing of the rental market, which was purely the result of a pandemic that only happened once in a century,” Hildebrand said. “After working our way through this, we’ll find the [Toronto] the market is still under-supplied from a long-term perspective. “
Rents, he said, “will continue to climb”.
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