Developers sitting on record Toronto condo inventory say combining units not a viable fix

Developers may be sitting on a record amount of inventory in Toronto, but experts say combining units to offer larger floor plans is not feasible as a way to start moving the stock they have.

There were 4,295 new condos completed and unsold in the first quarter of 2026 in Toronto, according to Urbanation. That’s more than double a year earlier and nearly five times higher than two years ago. Toronto now has about 92 months of completed new condo supply on the market, and 8,629 unsold new condos are under construction and slated for completion in the next couple of years.

According to the Bank of Canada, smaller units with three or fewer rooms represent 60 per cent of new condo units coming onto the market in Toronto, but only 30 per cent of new households have the characteristics typically associated with buyers of smaller units.

Small units were built primarily for investors when the market was booming and interest rates were low, making condos seem like a good return on investment. Since then, the market has cooled and investors have fled, leaving end users as the primary buyers — who are not as enthusiastic about those units as investors once were, experts told REM.

So what do developers do with their stock of smaller units? One idea that has floated around is combining units so what’s on offer more closely matches what the market wants.

How one developer made it work — before construction was complete

That’s exactly what developer Madison Group did during the pre-sale process of its The Capitol Residences in Toronto. Madison Group’s VP of high rise, Josh Zagdanski, told REM that buyers came to them asking for larger units.

“At that time, we were able to accommodate it in the pre-sell process and early in the construction process,” he said.

According to Zagdanski, they redesigned suites for about a dozen purchasers, going from about 1,500 square feet up to 2,500 square feet, and in some cases up to 4,000 square feet. He said the building’s location near Yonge and Eglinton was a big reason buyers wanted to combine suites — to get into where they wanted to be with the right size unit. He said they are open to combining suites again, but it is very location- and project-specific.

“You have to have the right location with the right size building with the right product type for that to be desirable to the purchaser,” Zagdanski said.

He warned, though, that combining units becomes impossible once construction is complete.

Why it’s nearly impossible once a building is finished

Corey Pacht, executive vice president of operations for developer Fitzrovia, agreed that combining units after construction is very difficult. He told REM that the walls between suites in condos are often shear walls, which hold up the structure and can’t be removed. While not every wall is a shear wall, there are enough of them to create serious challenges.

Reconfiguring the electrical would also be difficult, he said, but the real problem lies in plumbing. Pacht explained that pipes run vertically in a straight line through the whole building, making it very challenging to move them to accommodate a kitchen or bathroom in a different location.

“Practically, I’m not sure that you actually could (move kitchens or bathrooms),” he said. “Which would mean if you’re keeping (them) in the same spot, you’re probably not going to be able to officially design a new layout that would actually work.”

He estimated that without moving plumbing stacks, combining suites would likely cost at least $100,000, with moving plumbing adding to that. That makes combining units not a viable option for most developers, since the cost would likely exceed what they could charge to recoup it.

The price problem

Real estate agent David Fleming said that while combining units is a nice idea, it all comes back to price. A larger unit may be more appealing to end users, but if the price is too high, they still won’t buy. That’s especially true if buyers aren’t already biting on smaller units because of price.

“The price is the issue,” he said. “It’s not so much the size of (the unit).”

There are other complications as well, he noted, including getting permission from the condo board and the risk that the end unit doesn’t feel cohesive — more like two separate suites with a door in between. He said he had seen two suites combined before and the result was awkward, with a layout that still felt like two units.

“No one really wanted it, it was just overbuilt,” Fleming said. “No one needed that kind of space, there was no flow to it. It’s kind of like you can’t really put the toothpaste back in the bottle.”

Fleming said a better option for developers sitting on unsold inventory is to wait for market conditions to improve, which could happen within a few years given that new construction in Toronto has come to a halt. That means a supply shortage could emerge by the end of the decade, making what developers are sitting on all the more appealing to future buyers.

“In 2030, we’re going to have a massive condo boom because supply will be at all-time low levels and demand will be back,” Fleming said. “By then, I think the developers can hold on to (their inventory) and start to move it.”

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