What unit mix should developers choose for new rental projects? In previous posts I’ve made the point that there is such a large gap between supply and demand for rentals in most cities in southern Ontario that almost any rentals that are constructed will be leased. That’s not what developers, investors, and lenders want to hear, however, so I think it’s worth looking at the topic of unit mixes in detail. In this post I examine historical unit mix data to see what types of rentals have been built in some of Ontario’s largest cities; in a second, follow-up post, I will discuss what this data means for developers choosing unit mixes for new rentals.
The table below shows average percentage unit mixes for purpose-built rental apartments for twenty cities in southern Ontario chosen for their large populations and the large number of “new” purpose-built rentals, i.e. those constructed since the year 2000. Rental townhouses are not included. Percentages for each city are separated by unit types (number of bedrooms) and date of construction (before 2000, or in 2000 or later).
The table shows that in the decades prior to 2000 slightly more 2 bed than 1 bed apartments were constructed in the twenty cities chosen for this analysis. Studio and 3+ beds units were never constructed in sufficient amounts to have made up more than ten percent of total supply, and in some cities studios made up less than two percent. Cities in the suburban GTA, such as Brampton, Burlington, Mississauga, and Oshawa, had far more 2 beds constructed than 1 beds. To summarize, it’s apparent from this data that 1 beds were favoured by developers constructing new rentals in urban areas from the 1950s through the 1990s, while 2 beds were apparently favoured by developers in suburban areas of the GTA and medium-sized cities elsewhere in southern Ontario.
What about rentals constructed over the past two decades? The table shows that since 2000 a much different mix of rental apartments has been constructed by developers than before 2000. What has changed? First, few studios have been constructed since 2000, with the exception of in Toronto. Second, proportionally large amounts of 3+ beds have been constructed in some cities since 2000, mainly in Barrie, Brampton, Hamilton, and Kingston; in most other cities, proportionally fewer 3+ beds were constructed since 2000. Third, in nineteen of the twenty cities, far more 2 beds were constructed since 2000 than before 2000, so many in fact that in some cities the vast majority of new rentals constructed since 2000 were 2 beds. For example, in Burlington, over 55% of rental apartments constructed before 2000 were 2 beds, but after 2000 nearly 80% of new rental apartments were 2 beds. Similarly, in Mississauga, before 2000 roughly half of rental apartments constructed were 2 beds, while after 2000 over 85% were 2 beds. Oshawa is the only exception to this rule: slightly more 1 beds were constructed after 2000 than before. What about Toronto? Toronto is the only one of the twenty cities where a notable percentage of apartments constructed since 2000 were studios; slightly fewer 1 beds were constructed in Toronto since 2000 than before 2000, while 2 beds increased by a notable amount, although not by as large a weighting as in other cities.