By A.J. Keilty, President, KEILTY Realty Management
In 2026, plan on 12 to 18 months from first occupancy to stabilized occupancy in the Greater Toronto and Hamilton Area, and roughly 9 to 14 months in Ottawa and Ontario's mid-size cities. That is well behind the 6 to 9 month lease-up that pro formas written in 2021 and 2022 assumed. The clearest single data point: purpose-built rental buildings in the GTHA that are already at least a year old still carried a 6.8% vacancy rate in the second quarter of 2026, according to Urbanation's Q2-2026 rental market survey. The first birthday is no longer the finish line.
The trend has turned. Absorption is improving, new supply is easing, and concessions have started to come down. But the lease-up curve is flatter than it was, and the buildings that get hurt are the ones whose budgets, staffing, and lender covenants were built around the old curve.
Urbanation's Q2-2026 numbers for the GTHA are the most detailed picture available for Ontario:
Read that fourth bullet twice. Forty-four buildings, holding more than twelve thousand units between them, are still counted as in lease-up. Urbanation changed how it reports vacancy this year because the old definition of stabilized, meaning 95% occupancy achieved, "excluded the large and growing number of buildings in the occupancy phase that have been leasing up for an extended period." When a research firm has to redefine its benchmark because too many buildings never reach it on schedule, that tells you something about the market.
CMHC's 2026 Mid-Year Rental Market Update says the same thing from the national side. Vacancies are highest in structures built after 2020, rental operators report that new units are taking longer to rent, and "in some cases, it can take months to fill a vacant unit."
Four things are stacked on top of each other.
Supply arrived all at once. Rental completions in Ontario have been running at or near multi-decade highs. Urbanation projects 4,607 new purpose-built rental units completing in Ottawa in 2026, close to the 4,646 delivered in 2025. In the GTHA, 31,645 purpose-built rental units in 102 projects were under construction as of Q2-2026, the highest in decades.
Demand growth slowed at the same time. Population inflows pulled back, and CMHC projects total household growth in 2026 of 2.0% in Toronto and 1.3% in Ottawa. Supply growth outran that.
Investor-owned condos competed for the same renter. CMHC notes that competition from investor-owned rental condominium apartments has been "higher than usual," slowing absorption in larger markets. That competition is now fading as condo completions drop, but it shaped the last two lease-up cycles.
And new product competes with new product. The renter who can afford a $2,800 one-bedroom in a 2026 building can afford a $2,800 one-bedroom in the 2024 building down the street, and that building is offering two months free. CMHC found the highest vacancies in post-2020 stock, while "older stabilized buildings and family-sized units continue to experience tighter market conditions."
Work in net leases per month, not percentage occupancy per quarter. Net leases means signed leases minus cancellations and early terminations, which is the number your cash flow actually responds to.
The average new GTHA project reaching first occupancy in the first half of 2026 held roughly 266 units. To get from zero to 95% occupancy, that building needs about 253 executed leases. At 15 net leases a month, a defensible pace for a well-run lease-up with a competent on-site team and market-rate pricing, that is roughly 17 months. At 20 a month it is 13 months. At 10 a month, which is what happens when pricing is set from a two-year-old appraisal and nobody answers the phone on Saturday, it is 25 months.
Those three scenarios sit inside the same building, in the same market, on the same rent sheet. The difference is operations and pricing discipline, which is why we tell developers to settle the management structure before occupancy rather than after. We wrote about that gap in The First Lease-Up: What Commercial Developers Often Miss Moving Into Residential.
Concessions are no longer a contingency line. They are a normal cost of lease-up in 2026, and they need to be modelled in years one and two.
In the GTHA in Q2-2026, average face rents in post-2000 purpose-built product were $4.05 per square foot, or $2,864 for an average 707 square foot unit, down 1.7% year over year. After accounting for the value of incentives, net rents averaged $3.51 per square foot. That 13% gap is worth about $377 a month on the average unit.
Ottawa in Q1-2026 looked similar. A 57% share of post-2000 projects offered incentives. Two months free was the most common at 39% of projects, one month at 38%, and three months at 19%. Incentives cut face rents by an average of 11%, or $272 a month. Average rent for available units was $2,406 on 734 square feet.
On a 266-unit building, a 13% effective discount across the first full year of leases is roughly $1.2 million of revenue you will not collect. That is not a reason to skip the concession. It is a reason to know the number before your lender does.
Yes, and this is the part that gets expensive. Under section 111 of the Residential Tenancies Act, 2006 and section 12 of O. Reg. 516/06, a rent discount avoids changing the lawful rent only if it meets the prescribed conditions. If it does not, the discounted amount can become the lawful rent.
The Divisional Court applied this in Hazelview Property Services Inc. v. Matsui, 2024 ONSC 6897. A landlord accepted about half the agreed rent for 17 months as a pandemic accommodation, described it afterward as a deferral, and the Board found the discounted amount had become the lawful rent after a year. The court noted that where a discount is not set out in a written agreement, section 12(6) of the regulation effectively limits the landlord to one discount in a twelve-month period. As the court put it, "it is the landlord who controls the paper and pen."
The practical version for a lease-up: if you are giving two months free on a twelve-month term, the concession needs to be a written, dated addendum that states the gross monthly rent, identifies which rental periods are discounted, and states that the discount is a one-time inducement and not a reduction in lawful rent. Do not let a leasing agent handle it with a verbal promise and a line in an email blast. Do not let it drift into month thirteen. Do not paper 200 units three different ways because three different agents wrote three different versions.
Not the guideline. Under section 6.1 of the RTA, a unit in a building where no part was occupied for residential purposes on or before 2018-11-15 is exempt from the sections that impose the annual guideline. For everything else you are governed. You still cannot raise rent more than once every 12 months, and you still owe at least 90 days written notice on the correct Landlord and Tenant Board form.
Section 111 is not on the exemption list. So a botched concession in a guideline-exempt building can still reset your lawful rent, and the fastest legal path back is a 90 day notice you can serve only once a year. In a rent-controlled asset the ceiling is the guideline instead: 2.1% for 2026, and 1.9% for 2027. Either way, getting the paper right the first time is worth more than any concession you will offer.
Three extra months of lease-up on 100 units at a $2,864 average rent is roughly $859,000 of revenue that never arrives, and it never comes back, because rent is a perishable good. The larger cost is usually the valuation effect of discounts that embed permanently in the rent roll. At a 4.5% capitalization rate, every $100,000 of permanently lower annual net operating income is about $2.2 million of asset value.
That arithmetic is why lease-up velocity belongs on the same page as construction cost. To run the numbers on your own asset, our vacancy loss calculator handles the revenue side, and the pricing sections on our build-to-rent and apartment communities pages set out how our fee structure works. We charge a flat monthly rate per unit rather than a percentage of collected rent, so our fee does not climb every time your rents do, and it does not create an incentive to chase a headline rent that sits vacant for four months.
Across the lease-ups we have run in Ontario, the differences are unglamorous and consistent.
Yes, mostly in your favour. Kingston, Belleville, Peterborough, Cobourg, Brockville, Cornwall, and the Durham communities have not absorbed anything close to the volume of new purpose-built supply the GTHA has. That means less concession pressure and a competitive set made up mostly of older stock rather than brand new lease-ups.
It also means the calendar matters more. In Kingston and other university cities the September cycle dominates, and a building that reaches occupancy in October has effectively lost a leasing season. Urbanation reported in June 2026 that Ontario student housing deliveries are set to reach a record this year, so that competitive set is thickening too. If you are timing occupancy in a secondary market, work backward from your city's actual leasing season rather than the construction schedule. Our Kingston and institutional pages set out how we handle regional lease-ups across Ontario.
Conditions are improving. Absorption in the GTHA was up 44% in the first half of 2026, new supply is easing, condo competition is receding, and Urbanation's read is that rents "have likely found their floor." A building that leases well in 2026 will be in good shape by 2028. That only holds if it gets through lease-up without burning eighteen months of cash and permanently discounting its rent roll.
KEILTY Realty Management has been leasing and operating residential and commercial rental property across Ontario since 2003, from single houses to apartment communities and new purpose-built developments. If you have a building reaching occupancy in the next year and want a realistic absorption and pricing plan for your market, request a free rental evaluation or get in touch.
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