Canada's Secondary Cities Are Starting to Outperform Major Markets

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Date:

03 Jul 2026

While Canada’s major urban centers continue to dominate housing conversations, a quieter story is unfolding in the country’s mid-sized cities. Rents and population growth in markets outside Toronto and Vancouver have been rising at double-digit rates, even as conditions have softened in those gateway cities over the past two years. For NexLiving Communities Inc., a publicly listed multifamily operator on the TSX Venture Exchange, that divergence is not a surprise – it is the thesis the company has been building around for years.

“Our markets are performing extremely well relative to larger markets in Canada, which are experiencing affordability challenges and pushback against higher rents,” says Stavro Stathonikos, President and CEO of NexLiving. “That’s a validation of what we’re doing.”

Secondary Markets

NexLiving’s strategy centers on Canadian cities outside the Toronto-Vancouver axis – markets with strong manufacturing bases, logistics infrastructure, and in some cases, port access. The company’s argument is straightforward: as a country develops, economic activity and population growth spread beyond one or two dominant cities. Canada, in that view, is still in the early stages of that dispersion.

Stathonikos draws a comparison to the United States, where cities like Austin, Columbus, and Reno have developed into significant economic centers in their own right. “I think the next leg of growth for Canada will be filling in the remainder of the blanks,” he says.

The economics support the approach. Salaries in NexLiving’s target markets are broadly comparable to those in Toronto and Vancouver, but the cost of living is considerably lower. The company’s average unit runs around 1,000 square feet at approximately $1,500 Canadian per month. A comparable apartment in Toronto or Vancouver, according to Stathonikos, would likely run between $3,500 and $4,000.

“We’re the anti-expensive,” he says. “We’re in a nice place where you want to live, but you don’t have to pay that downtown rent.”

A Tenant Profile

NexLiving’s buildings are newer in vintage and well-amenitized, featuring golf simulators, gyms, barbershops, massage rooms, and proximity to parks, hospitals, and golf courses. That combination has attracted a specific and somewhat overlooked tenant demographic: the 55-plus downsizer.

These are former homeowners who maintained properties for decades and now want a lock-and-leave lifestyle, often splitting time between a Canadian apartment and a home in a warmer climate. According to Stathonikos, this group behaves very differently from younger or first-time renters, and that difference has a measurable impact on operations. Former homeowners who cared for a property for 30 years tend to treat rental units the same way – resulting in lower unit damage, fewer turnovers, and reduced capital expenditure on suite refurbishment.

Rather than cycling tenants to capture higher rents on turnover, NexLiving’s model prioritizes retention. The company invests in service quality to keep tenants in place longer, redirecting the capital it would otherwise spend on unit turnovers toward acquiring new properties. “Instead of spending all the capital we would spend to turn around the units, we’re retaining that capital and going to buy more units,” Stathonikos explains.

Technology as Table Stakes

Tenant satisfaction at scale requires more than good intentions. NexLiving has invested in a proprietary internal technology stack covering both hardware and software across its buildings, enabling better energy management, faster service response, and more efficient building operations. Other multifamily operators have pursued similar strategies through third-party platforms, but NexLiving built its system internally to maintain tighter control over costs and responsiveness.

“You can’t do it with just people,” Stathonikos says. “People expect technology. People expect instantaneous.”

Navigating a Capital Markets Slowdown

Despite strong operating results, NexLiving has not been immune to the broader chill in Canadian real estate capital markets. Large institutional investors have pulled back from the sector over the past three years, responding to interest rate volatility, inflation, and macroeconomic uncertainty.

“There’s a capital markets recession for this sector,” Stathonikos acknowledges. “Large pools of capital have retrenched and moved away.”

The company’s response has been to maintain performance and wait for conditions to normalize. There are signs that private capital is already taking a counter-cyclical view. In the past 12 months, three of the largest public multifamily REIT take-private transactions in Canadian history have occurred, involving First Capital, InterRent, and Minto, all Ottawa-based multifamily REITs. NexLiving is now the only remaining public Ottawa-based multifamily REIT, a position that carries both visibility and strategic significance.

The Devcore Merger

NexLiving’s most significant recent transaction was its 2024 merger with Devcore, a deal that came together after both companies recognized they were pursuing similar strategies. Cash flow from the acquired assets has grown 14 percent in the 18 months since closing, according to the company, and the merger brought geographic diversification that strengthened the overall portfolio.

Stathonikos describes the talent the deal brought in as its most underestimated benefit. The company’s current head of operations and several board members came through the Devcore combination, deepening the leadership bench in ways that pure financial analysis would not have captured.

Growth Targets

NexLiving currently manages approximately 2,000 apartments. The company expects to reach 3,000 units within 12 months, and 4,000 within 24 months, funded largely through internally generated cash flow rather than external capital raises.

The compounding logic is straightforward: retain good tenants, control costs, generate free cash flow, redeploy it into new assets, and repeat. Stathonikos frames this less as empire-building than as the natural outcome of disciplined operations. “We don’t do that because I have aspirations of having the largest company,” he says. “We just think it’s the best outcome for everyone.”

On the policy front, Stathonikos is closely watching Canada’s immigration and tax environment, arguing that the country needs to remain competitive with the United States to sustain the population growth that underpins long-term housing demand. “You can’t have your people have a worse deal than people in the US,” he says. “You’ve got to make sure you have comparable tax rates, comparable opportunities, comparable job growth.”

For investors and developers watching Canada’s rental market from a distance, NexLiving’s trajectory offers a useful lens, though it remains one company’s bet on a broader thesis that secondary markets will continue gaining ground. The headline story of unaffordable gateway cities may be accurate, but it is not the whole picture. In the mid-sized markets that most institutional capital has historically overlooked, rents are climbing, populations are growing, and operating fundamentals are pointing in directions that the major cities are not.

About the Expert: Stavro Stathonikos is President and CEO of NexLiving Communities Inc., a publicly listed multifamily operator on the TSX Venture Exchange focused on Canadian secondary markets outside Toronto and Vancouver, currently managing approximately 2,000 apartments.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

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