Toronto's Rental Market Has Started to Recover: What Urbanation's Q3 Data Means for Renters, Landlords and Buyers

The short answer: According to Urbanation's Q3-2026 rental market results, released October 27, 2026, the Greater Toronto Hamilton Area (GTHA) rental market has entered a recovery phase. Vacancy in stabilized purpose-built rentals fell to 3.0%, the share of new rental buildings offering incentives dropped to 60% from 67% in Q2, active condo rental listings were down 25% from a year earlier, and average condo rents rose 2.4% from Q2. Rents are still slightly lower than a year ago, but the gap is narrowing. For renters, the window for big incentives looks smaller. For condo owners and buyers thinking about rental income, the numbers are worth a fresh look.

This post is written by The Starke Group, the Toronto real estate team led by Brett Starke and powered by RARE Real Estate Inc. We read the full Urbanation release so you do not have to, and we have kept to the numbers it reports.

What did Urbanation report for Q3 2026?

Urbanation's Q3-2026 release is titled "Rental Recovery Begins in the GTHA as Vacancy and Incentives fall." The main points:

• Record leasing. New purpose-built rentals absorbed 1,911 units in Q3, bringing net absorption for the first nine months of 2026 to a record 5,092 units, up 22% from 2025. Condo lease transactions reached a record 54,324 units year to date, up 6%.
• Lower vacancy. Vacancy in stabilized purpose-built buildings fell for a third straight quarter to 3.0%, down from 3.5% a year earlier.
• Fewer incentives. 60% of purpose-built projects offered incentives in Q3, down from 67% in Q2. That was the largest quarterly drop since Q2-2022. One month of free rent replaced two months as the most common offer.
• Rents turning higher. Average condo rents rose 2.4% from Q2 to $3.83 per square foot, the strongest third-quarter gain since 2023.

Urbanation President Shaun Hildebrand said the Q3 data "provides enough evidence to confirm that the GTHA rental market has entered a recovery phase."

Are Toronto rents going up again?

From quarter to quarter, yes. From year to year, not quite yet. Urbanation reports average condo rents of $3.83 per square foot, or about $2,604 for an average 681 square foot unit. That is up 2.4% from Q2 but still down 0.6% from a year ago, which Urbanation says is the smallest annual decline since the downturn began in mid-2024.

In purpose-built rentals, same-building rents net of incentives rose 0.9% from Q2, the largest quarterly gain since Q3-2023, and were down 1.5% from a year earlier. Average face rents in those buildings were $4.11 per square foot, or about $2,921 for a 710 square foot unit.

Downtown is leading. Condo rents in the former City of Toronto rose 0.7% from a year ago, the first annual increase in the core since early 2024.

This can look like it clashes with earlier headlines. In October we wrote that Toronto asking rents hit their lowest September level since 2021. That report tracked asking rents on listings. Urbanation's quarterly numbers track leased condo rents per square foot and rents in purpose-built buildings. Both can be true at once: rents are still below last year's levels, but the direction in the most recent quarter has turned up.

Why is the rental market tightening?

The short version is that fewer units are available while leasing stays strong.

Active condo rental listings fell 25% from a year ago to 3,705 units at the end of Q3, the largest annual decline since Q2-2022, and are down 43% from their peak. Months of supply dropped to 0.7, below the long-term average of 1.0. Leases equalled 81% of listings, a level Urbanation says has been followed by rising rents over the next year more than 80% of the time.

The bigger driver is the construction pipeline. Condo units under construction fell 38% from a year ago to 35,920, the lowest level since early 2012. We covered the sharp drop in new condo construction in Toronto Condo Starts Collapse to 156 Units in H1 2026. Purpose-built rental construction is rising fast, with 5,067 units started in Q3, a multi-decade high, and 34,545 units under construction. Hildebrand expects "the recovery in rents will gain momentum as overall rental supply declines, since the increase in purpose-built construction will only replace part of the drop in condo completions." That is Urbanation's outlook, not a guarantee, and conditions can change.

Is there still a lot of empty rental supply?

In brand-new buildings, yes. This is the part of the report that is easy to miss. Including all buildings still in their lease-up phase, total purpose-built vacancy rose to 13.3% from 12.1% a year earlier, because of the record volume of new units. A record 2,704 purpose-built units were completed in Q3 alone.

In practice, the recovery is showing up first in established buildings, while newer towers are still filling up. That matters if you are renting, because newly completed buildings are where incentives are most likely to remain.

What does this mean for renters?

• Incentives are shrinking. With fewer projects offering them, and one month free now more common than two, it may be worth acting sooner if you find a deal you like.
• Look at newer buildings. Buildings in lease-up still carry much higher vacancy, so they are the most likely place to find room to negotiate.
• Compare net rent, not face rent. A month free on a 12-month lease lowers your effective monthly cost. Ask what happens at renewal when the incentive ends.
• Plan for renewal. If rents keep firming, your renewal offer may look different from today's market. Budget for that rather than assuming current pricing holds.

What does this mean for condo owners and investors?

For owners who rent out a condo, fewer competing listings and faster leasing can mean shorter vacancies and less pressure to discount. It does not mean every unit will rent quickly or at a higher number. Layout, building, location and condition still matter a great deal, and rents in many segments are still below last year.

If you are weighing whether to buy a condo to rent out, or whether to keep one you own, run the numbers on current rents, not hoped-for rents. Our post on Toronto condo mortgage payments versus average rents walks through how carrying costs compare.

Should buyers care about rental data?

Yes, for two reasons. First, if you are a first-time buyer comparing renting with owning, a firmer rental market changes that comparison over time. Second, rental demand affects how easily a condo can be rented or resold to an investor later. Rental data is one input among many. It is not a reason to rush, and it does not tell you what any single property will be worth.

Frequently asked questions

What is the GTHA purpose-built rental vacancy rate?
Urbanation reports 3.0% in stabilized buildings in Q3-2026, down from 3.5% a year earlier. Including buildings still leasing up, total vacancy was 13.3%.

What is the average condo rent in the GTHA?
Urbanation reports $3.83 per square foot in Q3-2026, or about $2,604 for an average 681 square foot unit.

Are landlords still offering free rent?
Yes, but less often. 60% of purpose-built projects offered incentives in Q3, down from 67% in Q2, and one month free is now the most common offer.

Are rents in downtown Toronto rising?
Condo rents in the former City of Toronto were up 0.7% from a year earlier in Q3, the first annual increase in the core since early 2024.

Talk it through with our team

Whether you are renting, leasing out a condo, or deciding between renting and buying, The Starke Group can help you read the numbers for your building and neighbourhood and plan your next step. When you are ready, Connect with The Starke Group.