Reflecting upon the past couple of years, it has become apparent the Canadian multi-residential market has been undergoing a significant transformation.

Amid rising interest rates and shifting buyer-seller dynamics, developers and investors are facing a new reality — one in which closing certainty often outweighs price, and where traditional condo development is giving way to purpose-built rentals.

I have several key conversations with industry influencers every month, and their insights have illuminated the key challenges and opportunities shaping the market today.

Here’s what you need to know.

The shift: Closing certainty over price

For years, the market favoured sellers, with developers commanding top dollar for multifamily assets. However, a recent $70-million transaction in Cambridge (just west of Toronto) highlighted a fundamental shift — buyers now hold more power, and certainty of closing is more valuable than achieving peak pricing.

In today’s higher-interest-rate environment, financing is more unpredictable. Lenders are tightening criteria and buyers are more cautious.

Many deals fall apart in due diligence, forcing sellers to prioritize well-capitalized buyers. Investors who structure offers emphasizing certainty — such as vendor take-back mortgages or strategic partnerships — can gain a competitive edge.

The rise of purpose-built rentals amid condo market slowdown

Another trend reshaping the market is the shift from condo developments to purpose-built rentals.

So much so, that we’re delivering a Condo Pivot to Rental workshop in June, exclusively for developers. With pre-sale thresholds moving at a snail’s pace, and investors wary of slow condo sales, many developers are opting for rental housing.

Several factors contribute to this shift:

• Uncertainty: The uncertainty of everything has taken its toll on everyone’s confidence. Buy when there’s “blood on the street.”
• Affordability pressures: Volatile interest rates have priced many would-be buyers out of the market, increasing rental demand.
• Institutional investment appeal: Purpose-built rentals offer steady cash flow and are attractive to pension funds and REITs.
• Government incentives: Recent tax reforms, including the elimination of GST on new rental developments, are making rental projects more viable.

However, transitioning from condo to rental requires reworking financial models, adjusting zoning and accounting for different absorption timelines. You require experience within your development teams, or from other multifamily industry experts, to navigate this shift successfully.

The pricing disconnect: Why buyers and sellers are at a stalemate

A major challenge is the widening gap between buyer expectations and developer pricing (bid and ask). Many sellers are holding onto valuations from 18 to 24 months ago, while buyers — aware of higher borrowing costs — are unwilling to meet those price points.

Generally, this standoff has slowed transaction volume, while the looming political climate threatens to influence future transactions.

The solution? Creative deal structuring. We are seeing the increased use of:

• Joint ventures that allow developers to retain equity while securing capital.
• Seller financing options to bridge valuation gaps.
• Off-market transactions to keep dealings private and reveal unplanned opportunity.

For buyers, this uncertainty presents an opportunity to acquire quality assets at more reasonable valuations — provided they embrace deal structures that are slightly more complex.

Looking south: High returns in a comfort zone

As challenges mount in Canada, some developers and investors are looking to the U.S., particularly the Midwest, where pro-business policies and strong job markets create favourable conditions for multi-residential investment.

Investing in an industry that they are familiar with; some developers are taking their sidelined capital south.

We are seeing clear advantages of this market, in terms of:

• Landlord-friendly with fewer regulations in the marketplace.
• Better deal-making conditions with programmatic developers and financers.
• Stronger population and job growth, re-industrialization of America is sustaining rental demand.

These insights come from working with clients to explore cross-border opportunities.

Conclusion: What’s next for Canada’s multiresidential market?

Despite current challenges, opportunities remain for those willing to adapt. The key takeaways for buyers and sellers:

• Certainty matters more than price — sellers should prioritize strong buyers with reliable financing.
• Rental development is pivoting, transitioning from condo to rental requires careful planning.
• Creative deal structuring is essential to bridge pricing gaps.
• The U.S. Midwest presents compelling investment opportunities for Canadian capital. 

Experience has taught me that focusing on clients’ needs is what yields the best results; our clients don’t change, their needs and opportunities do.

In this climate of uncertain buyer-seller expectations, new solutions are needed for continued success.