Incentive offers rise as apartment operators compete with condos for tenants

A person walks past a Concert Properties The Kip District advertisement promoting "One Month's Rent Free + $1,000" on Toronto's Dundas Street West on Sept. 25, 2024. Photo by Peter J. Thompson/National Post

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Free parking, free wifi and signing bonuses are just some of the perks apartment building owners are offering prospective tenants as competition in the rental market intensifies.

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According to a new report from real estate research firm Urbanation, 66 per cent of rental projects in the Greater Toronto Hamilton Area (GTHA) offered incentives to attract tenants in the first quarter of 2026 — up from 62 per cent a year ago and double the amount offered two years ago.

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Urbanation said the use of incentives has become widespread in the GTHA, with institutional, purpose-built operators such as CAPREIT and Minto Apartments offering months of free rent, free parking and “special offers” like free WiFi and $500 signing bonuses.

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The firm found that the most common incentive in the first quarter of the year was two months of free rent, offered by 47 per cent of rental projects, up from 32 per cent in the same period last year. At the same time, the number of projects offering one rent-free month dropped to 42 per cent from 53 per cent last year.

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Other variations of the free rent theme became popular in the first quarter, with offers of a free month-and-a-half and a free three months increasing from two per cent to six per cent and one per cent to four per cent, respectively.

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A break on rent wasn’t the only incentive that became more common last year. Cash move-in bonuses also topped the list of perks, jumping from 10 per cent to 17 per cent year over year in Q1.

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Rising inventory and weakened demand in both the resale and new condo market have redirected investors and institutional buyers to the rental market. Canada Mortgage and Housing Corporation has also noted a rise in projects pivoting from ownership to rental over the last year.

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Purpose-built rentals are facing unprecedented competition, said Shaun Hildebrand, president of Urbanation.

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“Rental operators are grappling with a deluge of supply at the moment, due to intense competition from the condo market and a surge in tenants moving to get a better deal,” he said.

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Vacancy rates in buildings that have passed the lease-up phase and are now operating normally increased by 5.4 per cent in the first quarter of 2026, up from 3.6 per cent a year earlier.

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Urbanation reported that this occurred as population inflow slowed and tenant turnover added to the supply of available units. The availability rate, which includes vacant units and units that have an imminent vacancy on the books, reached a record 8.0 per cent.

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The impact of rising vacancies and more units coming to market is beginning to show up in pricing. Urbanation found that, when accounting for the monetary value of incentives offered in the market, net rents in the first quarter declined by 3.8 per cent annually to a 16-quarter low of $3.52 per square foot. The incentives reduced rents by an average of 13 per cent or $379.