08/15/2014 12:02 EDT | Updated 10/15/2014 05:59 EDT

Toronto Condo Rental Demand Hits All-Time High

Vince Talotta via Getty Images
TORONTO, ON - MAY 29: The intersection of Front Street and Lower Jarvis street in Toronto, with the CN Tower, Flatiron Building, condos and esplanade in background. May 29, 2014. (Vince Talotta/Toronto Star via Getty Images)
Rental demand in Canada's largest condo market surged to a record level in the last three months, according to new data from market research firm Urbanation. 

The report shows a trifecta of broken records. The numbers of condos rented in Toronto in the second quarter grew 26 per cent from last year to an all-time high of 6,708 units. Also reaching a record high was the number of condos listed, up 29 per cent to 9,069 units. And the average unit size rented hit a record low of 755 square feet, a drop of nearly four per cent from 2013.

With listings outpacing demand, and renters seeking smaller condos, average monthly rent levels dropped three per cent to $1,787 — the third straight month shrinking condos have manifested lower rent.

“A surge of new supply from recently registered buildings kept rents in check during the quarter. Although listings are expected to remain strong as more units complete construction, rental demand shows no signs of abating, which should keep rents steady,” said Shaun Hildebrand, senior vice president at Urbanation.

Too much supply?

Earlier this year, a report from CIBC warned that the excess supply of units in Toronto could spur a slowdown in the overall housing market in the coming years.

"The fear is that increased supply of rental units will flood the market and will lead to a wave of sales by disappointed investors with no bargaining power," wrote CIBC deputy chief economist Benjamin Tal in February.

It's estimated that almost one out of five condos in Toronto are investor-owned, according to the Canada Mortgage and Housing Corporation (CMHC).