Market Intelligence
People often talk about "the Canadian rental market" as if it's one thing. It isn't. Underneath the national headlines, there are at least two markets — the biggest cities, like Toronto, Vancouver, and Montréal, and a set of smaller cities that behave differently. Rents look different. Demand looks different. The price investors pay for the same kind of building looks different. Understanding how these two markets relate to each other is one of the most useful tools an investor can have.
01
What the labels mean
02
Where rent levels lead
03
Where rent growth runs firmer
04
The cap rate spread
05
The building pipeline
06
Three reading habits
Part One
The short answer
There's no official designation. Most Canadian commercial real estate investors place Toronto, Vancouver, and Montréal in the "primary" group — the largest, most actively traded apartment markets. Calgary, Ottawa, and Edmonton typically sit in the next tier. The clearer "secondary" group includes Hamilton, Kitchener-Waterloo, London, Halifax, Winnipeg, Québec City, Victoria, and Windsor — real institutional markets operating at smaller scale (Source: industry convention; CMHC Housing Market Information Portal).
There's no official line that separates "primary" from "secondary" cities in Canadian commercial real estate. Canada's housing agency reports detailed data on every CMA, and big real estate firms group cities by how active their markets are, how many investors operate there, and how easy it is to buy or sell there.3
In practice, most investors put Toronto, Vancouver, and Montréal firmly in the "primary" group. These are the cities where the most apartment buildings change hands, where pension funds and big public real estate companies own the most, and where prices are clearest because so many transactions happen.
Calgary, Ottawa, and Edmonton usually sit in the next group — sometimes called primary, sometimes called "upper secondary," depending on who's writing.
The clearest "secondary" group includes Hamilton, Kitchener-Waterloo, London, Halifax, Winnipeg, Québec City, Victoria, and Windsor. These are real markets with real institutional ownership and steady transaction activity, but at a smaller scale, and with somewhat fewer buyers competing in any given month than the biggest cities.3
Industry labels reflect history and where institutional money has flowed in the past, more than what's true today. A market that was "secondary" five years ago may now have a lot more buying and selling activity, more brokers covering it, and more institutional owners. A "primary" market may have specific neighbourhoods that are running tighter than their city-wide reputation suggests. Investors who treat the labels as fixed often miss where money is actually finding the better entry points.
Part Two
The short answer
Per CMHC's 2025 Rental Market Report, average rents in Toronto, Vancouver, and Montréal sit well above smaller-city averages. Vancouver leads on absolute rent for major Canadian cities; Toronto follows closely. Among secondary cities, Halifax and Victoria run highest, with Hamilton and Kitchener-Waterloo above the smaller-city average and Winnipeg, Québec City, and Windsor below it. City-wide averages hide significant neighbourhood-level variation (Source: CMHC 2025 Rental Market Report).
Canada's housing agency's most recent rental report shows average rents in Toronto, Vancouver, and Montréal sitting well above the average across the smaller cities.1 Vancouver still has the highest average rent of any major Canadian city. Toronto is close behind on most apartment types. Montréal is noticeably lower than both, with rent growth that has been firmer than its absolute level suggests.
Among the smaller cities, Halifax and Victoria have the highest average rents, with Hamilton and Kitchener-Waterloo running above the smaller-city average and Winnipeg, Québec City, and Windsor running below it.1 These are city-wide averages — within any one city, the range across neighbourhoods and apartment types is wide.
| Group | City | Where it sits |
|---|---|---|
| Primary | Vancouver | Highest average rent of major Canadian cities. |
| Primary | Toronto | Close behind Vancouver; tightest range across apartment types. |
| Primary | Montréal | Noticeably lower in absolute terms than Vancouver and Toronto. |
| Primary / upper-secondary | Calgary, Ottawa, Edmonton | Mid-range absolute rents; significant institutional activity. |
| Secondary | Halifax, Victoria | High end of the smaller-city group. |
| Secondary | Hamilton, Kitchener-Waterloo, London | Mid-cluster; their connections to bigger cities matter a lot. |
| Secondary | Winnipeg, Québec City, Windsor | Lower absolute rent; different demand drivers. |
| Direction-only positioning based on CMHC's 2025 Rental Market Report. Rent levels and rankings are city-wide averages and hide significant variation between neighbourhoods. Group labels reflect industry convention, not an official agency category. | ||
Figure 1 · Canadian CMAs · 2025
Where each market sits on rent level and 12-month rent change.
Part Three
The short answer
Across several recent CMHC reporting periods, smaller Canadian cities have shown faster rent growth than the biggest cities, on data published so far. Three forces drive this: households priced out of expensive primary cities moving to nearby secondary ones (Hamilton-Toronto, Victoria-Vancouver); heavier new construction in primary cities pulling rent growth flatter there; and local job and migration stories — tech hiring in K-W, in-migration to Halifax and Calgary — supporting rent growth in specific smaller cities (Sources: CMHC; Statistics Canada).
Where the picture gets more interesting is rent growth, not rent level. Across several recent reporting periods, smaller Canadian cities have actually shown faster rent growth than the biggest cities, on the data published so far.1 This is not a permanent rule and not a forecast — it's a description of what the recent reports have shown.
Three things drive this:
Households that get priced out of expensive primary cities look at nearby smaller cities that cost less. Hamilton-Toronto and Victoria-Vancouver are the clearest examples. KW and London play a similar role for parts of the GTA and southwestern Ontario.3
CMHC's spring 2026 supply report shows new buildings opening up most heavily in Toronto and, to a lesser extent, Ottawa.4 Smaller cities, with smaller building pipelines, haven't been dealing with the same wave of new buildings — which has supported rent growth in those cities in recent reports.
Rent in smaller cities is sensitive to specific local stories — tech hiring in KW, people moving into Halifax and Calgary, manufacturing investment in Windsor.5 Those stories can produce stronger rent growth than national averages even when absolute rent stays below the big cities.
“The level is in the big cities. The growth is often in the smaller ones. The opportunity is in reading both honestly.”
Part Four
The short answer
A cap rate is a building's annual rental income (after operating expenses, before mortgage) divided by its purchase price. Across Canadian apartment markets, primary-city cap rates have generally been lower than secondary-city cap rates — investors pay more per dollar of income in big cities for easier liquidity. The cap rate spread between primary and secondary widens when borrowing is harder and compresses when it's easier. Where the spread sits today affects the math on every purchase (Sources: CBRE Canada; Colliers Canada; Altus Group).
Here's where the article gets a bit more technical — but the idea is simpler than the term sounds.
A cap rate is just the rental income a building produces in a year (after operating expenses, before the mortgage), divided by what the building costs to buy. It's expressed as a percentage. A higher cap rate means the building is "cheaper" relative to the income it produces. A lower cap rate means it's "more expensive" relative to the income it produces.
A simple worked example
Across Canadian apartment markets, cap rates in primary cities have generally been lower than cap rates in smaller cities — meaning investors have been willing to pay more for the same dollar of rental income in big cities than in smaller ones.2 Why? Because big cities are easier to buy and sell in (more buyers, more brokers, more transactions), and that ease is something investors will pay for.
The size of the gap between primary and secondary cap rates — what's called the cap rate spread — expands and shrinks with the cycle. When borrowing money is harder, the spread tends to widen as buyers re-price the risk of smaller cities. When borrowing is easier, the spread tends to shrink as investors hunting for higher returns push further out into smaller cities. CBRE, Colliers, and Altus track these spreads in their quarterly research.2
Where the spread sits today, in early 2026, matters for the math on every purchase. A wider spread means buying a building in a smaller city offers meaningfully more annual income per dollar invested than a similar building in a bigger city — which can compensate (somewhat, not entirely) for the extra risk of the smaller market. A narrower spread means the market is treating big and small cities more equally, which changes which one looks like the better entry. The exact spread on any one building depends on its neighbourhood, age, condition, and the leases in place.
A cap rate, by itself, just tells you the entry yield on a building's stable rental income. Read on its own, it can mislead — a high cap rate might mean an attractive deal, or it might mean the market thinks the building carries more risk. Reading the spread across cities, building types, and ages is what lets investors translate cap rates into a real comparison: where is the market overpaying for perceived safety, and where is it discounting a building that might, on closer look, be more institutional-quality than its location reputation suggests?
Spreads also tell you something about the cycle. When cap rates fall (compress) everywhere, money is flooding into the asset class. When the spread between primary and secondary widens, investors are getting more selective. Watching the direction of the spread — not just the absolute number — is, in our view, an important institutional habit.
Part Five
The short answer
CMHC's Spring 2026 Housing Supply Report shows the heaviest absolute new-apartment openings continuing in big cities — especially Toronto, with Vancouver and Montréal also opening meaningful new product. Smaller cities are opening fewer buildings in absolute numbers but can still see meaningful local concentration in specific cities and neighbourhoods (London is one example). Neighbourhood-level pipelines matter more for underwriting than city-wide aggregates (Source: CMHC Spring 2026 Housing Supply Report).
CMHC's spring 2026 supply report shows that the heaviest absolute number of new apartment buildings continues to open in big cities — especially Toronto, with Vancouver and Montréal also opening meaningful new product.4 Smaller cities have smaller numbers of new buildings opening in absolute terms, but as a share of buildings already standing, they can still be meaningful in specific cities and neighbourhoods.
The takeaway is twofold. First, big cities will need to fill up more new units over the next two years than smaller cities will, on average. Second, this doesn't mean every smaller city is short on buildings — some mid-sized cities have seen a heavy wave of new buildings concentrated in specific neighbourhoods (London is one example), where the local picture matters more than the city-wide one.
Part Six
The short answer
Three habits. First, look at both rent level and rent growth — primary cities lead on absolute rent, smaller cities have recently run firmer on growth. Second, watch the cap rate spread, not just the absolute number — its direction over the past 18–24 months tells you where the cycle sits. Third, evaluate the building pipeline at the neighbourhood level, not the city-wide level — city-wide figures hide the underwriting-relevant detail (Sources: CMHC; CBRE; Colliers; Altus).
Big cities still lead on absolute rent. Smaller cities have, in several recent reports, run firmer on rent growth.1 An institutional read holds both at the same time and underwrites against the combination — not just one.
Where the gap between primary and secondary cap rates sits today, and how it has moved over the past 18 to 24 months, is more useful than the absolute number on either side.2
City-wide new-construction numbers are a starting point. Neighbourhood-level new buildings, planning approvals, and committed openings over the next 24 months are what actually drives fill-up risk on a specific building.4
01
Lankin's portfolio is built across primary and secondary Canadian cities, with weights chosen against the rent, cap rate, and building-pipeline gaps described above — not against a fixed primary-secondary split. As those gaps move with the cycle, our buying pace, city mix, and pricing discipline reflect what's ahead, rather than what's already happened.
02
Reading an apartment investment strategy is, in our view, easier when the questions are: where does the manager actually own buildings, what does the rent picture look like across big and smaller cities, and how is the buy price set against the cap rate spread today? Those are the questions Lankin asks of every purchase, and the same ones we'd encourage prospective investors to ask of any private real estate strategy under review.
Common questions
What's the difference between primary and secondary Canadian apartment markets?
There's no official designation. Most Canadian commercial real estate investors place Toronto, Vancouver, and Montréal in the "primary" group — the largest, most actively traded apartment markets. Calgary, Ottawa, and Edmonton typically sit in the next tier. The clearer "secondary" group includes Hamilton, Kitchener-Waterloo, London, Halifax, Winnipeg, Québec City, Victoria, and Windsor — real institutional markets operating at smaller scale (Source: industry convention; CMHC Housing Market Information Portal).
Where are rents highest in Canada in 2026?
Per CMHC's 2025 Rental Market Report, average rents in Toronto, Vancouver, and Montréal sit well above smaller-city averages. Vancouver leads on absolute rent for major Canadian cities; Toronto follows closely on most apartment types. Montréal is meaningfully lower than both in absolute terms. Among secondary cities, Halifax and Victoria run highest, with Winnipeg, Québec City, and Windsor at the lower end of the secondary cluster (Source: CMHC 2025 Rental Market Report).
Why do smaller Canadian cities sometimes have faster rent growth than Toronto or Vancouver?
Three forces drive this on the data published so far. Households priced out of expensive primary cities move to nearby secondary ones (Hamilton-Toronto, Victoria-Vancouver). Heavier new construction in primary cities pulls rent growth flatter there as supply absorbs. And local job and migration stories — tech hiring in K-W, in-migration to Halifax and Calgary — support rent growth in specific smaller cities beyond what national averages would suggest (Sources: CMHC; Statistics Canada migration data).
What is a cap rate spread, and why does it matter?
A cap rate is a building's annual rental income (after operating expenses, before mortgage) divided by its purchase price. The cap rate spread is the difference in cap rates between two markets — typically primary versus secondary. Across Canadian apartment markets, primary-city cap rates have been lower than secondary-city cap rates, meaning investors pay more per dollar of income in big cities for easier liquidity. The spread widens when borrowing is harder and compresses when it's easier (Sources: CBRE Canada; Colliers Canada; Altus Group).
How should investors weigh primary vs secondary apartment markets in their portfolio?
It's a portfolio-construction question, not a market-picking exercise. Holding only big-city buildings concentrates in highest absolute rents but heaviest new-supply pipelines. Holding only smaller-city buildings can leave portfolios reliant on specific local stories. A diversified Canadian apartment portfolio typically combines both, with the mix calibrated to rent levels, the cap rate spread, the building pipeline at the neighbourhood level, and the investor's own situation. Past patterns are not a reliable indicator of future performance.
Forward-looking information. Certain statements in this article constitute forward-looking information ("FLI") within the meaning of applicable Canadian securities laws. Forward-looking statements include words such as "expect," "anticipate," "may," "will," "could," "intend," "plan," "believe," and similar expressions, as well as statements about future market conditions, rent growth, cap-rate movement, supply pipelines, demand drivers, and investment outcomes. Forward-looking information is based on assumptions and is subject to risks and uncertainties — including macroeconomic, demographic, regulatory, and market-specific factors — that may cause actual results to differ materially from those expressed or implied. Lankin Investments undertakes no obligation to update forward-looking information except as required by applicable law.
Balancing context. While this article describes characteristics of the Canadian multi-family rental market that have historically supported relative stability — including supply and demand dynamics, occupancy levels, and rent profiles — investments of this kind are subject to a range of risks, including market, credit, interest rate, regulatory, operational, liquidity, and concentration risk. There can be no assurance that any historical pattern, market characteristic, or operating approach will continue or produce a particular outcome in the future. Past performance is not a reliable indicator of future performance.
This article is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any offering of securities by Lankin Investments will be made only to qualified investors pursuant to applicable exemptions from prospectus requirements and only by way of an offering memorandum or other authorized offering document, which should be reviewed in full prior to making any investment decision. Investors should consult their own legal, tax, and financial advisors before acting on any information in this article.
Information presented is sourced from third parties believed to be reliable; Lankin Investments has not independently verified, and does not assume responsibility for the accuracy or completeness of, third-party data. Market commentary reflects Lankin's view as of the publish date and may change without notice.