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Apartment vacancy rates in Toronto hit a record high late last year, spiking to 5.7 per cent as demand weakened during the pandemic and sent monthly rents tumbling.

A number of factors slowed demand for apartments and condo rentals: border restrictions slowed immigration to the Toronto region; foreign and domestic students did not stay in the city for postsecondary education; downtown workers who lost their jobs as offices emptied out were no longer able to pay rent and were forced to leave their units; and office workers who were renting condos and working from home left the city to find more room in the suburbs.

All that occurred as a record number of new condo units were completed and Airbnb hosts converted their spaces to long-term rentals when tourism evaporated.

That increased supply, combined with the slowdown in demand, pushed rent down in apartments and condos across the Toronto region. The steepest decline was in the city of Toronto, where the average monthly condo rent fell 17 per cent to $2,104 in the fourth quarter, according to industry research group Urbanation Inc. With the Toronto region in yet another lockdown, demand for downtown condo living continues to falter.

“Vacancy rates and condo rental listings will remain high in the first part of the year as the city remains in lockdown,” said the group’s president Shaun Hildebrand.

Over all, the apartment vacancy rate in the city more than quintupled from 1.1 per cent at the end of 2019. The fourth quarter’s 5.7-per-cent vacancy rate is the highest level the federal housing agency has recorded in 50 years, according to Urbanation, and comes after nearly a decade of being under 2 per cent.

Rising vacancies led apartment landlords and condo owners to slash rents. Average monthly rent for apartments in the Toronto region was $2,289 in the fourth quarter, down 8 per cent compared with the same period in 2019, according to Urbanation. In the city of Toronto, rent was down 10 per cent to $2,337. In the surrounding areas, which include Mississauga and Brampton, rent fell 2 per cent to $2,139.

The average rent for a condo, which are individually owned, unlike apartments, dropped 14 per cent to $2,076 across the Toronto region, the lowest since mid-2017. Like apartments, the drop was greater in the city.

Downtown Toronto, the country’s financial capital and largest employment hub, has emptied out as office workers are required to work from home. Business has evaporated for the hundreds of restaurants, retailers and other services that cater to the office workers.

But commercial real estate developers and condo realtors expect demand to increase as the province vaccinates more Ontarians and companies are expected to require their workers to return to the office.

“Everything that makes urban living desirable is on hold. As long as that is on hold, we should not be surprised by these numbers. We shouldn’t take it as any indicator of future conditions,” said Jennifer Keesmaat, Toronto’s former chief planner who recently launched a company to develop rental housing.

Recent data from Statistics Canada show migration out of the city and to the suburbs accelerated in the early months of the pandemic. But Ms. Keesmaat and Mr. Hildebrand say they believe the softer rental market is temporary, especially with Ottawa increasing immigration targets over the next few years to compensate for the pandemic’s drought.

“The shortage of housing supply that we had going into the pandemic has not gone away,” Ms. Keesmaat said. “We still have a significant shortage of rental housing in relationship to population and immigration growth,” she said.

Toronto’s ultralow rental vacancy rate and soaring home prices had pushed real estate companies to develop condos and apartments. Last year, 23,000 new condo units were completed in the Toronto region and 22,434 are due this year, according to Urbanation. Many more are in the pipeline, with big developers such as Oxford Properties announcing major plans.

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