Canadian residential real estate insolvencies are set to surpass global financial crisis levels, the Globe and Mail reported.

This year’s insolvencies are on track to reach 240, marking a 53% rise year-over-year and a 13% increase from 2009, the Globe reported while citing federal Office of the Superintendent of Bankruptcy figures. From January to May 2024, there were an average of 20 rental or leasing insolvencies per month.

“This has been a long time coming,” Colin Doran, head of development advisory for Toronto-based commercial real estate market intelligence firm Altus Group, told the Globe.

Doran has been advising clients on distressed real estate projects for 15 years.

“There are no doubt more real estate projects in distress, but it’s hard to tell how many can be worked out before ending up in an insolvency position,” he told the Globe. “We expect there will continue to be more unsophisticated developers in trouble.”

Developers’ troubles have been largely attributed to increased borrowing costs tied to high interest rates and larger construction-related expenses.

“For the first time in a really long time in Canada, we are seeing some stress in the system,” Syl Apps, co-head of Canada for Hines, told the Globe.

Insolvency experts told the publication that real estate-related receivership cases are also on the rise. The OSB does not include receiverships with its bankruptcy statistics.

But, according to Insolvency Insider Canada, real estate-related receiverships accounted for 55% of the overall total, the Globe reported.

Lenders have pushed a number of large multi-residential projects into receivership, including Sam Mizrahi’s luxury downtown Toronto condo tower the One and Vancouver’s Harlow project. The One owes about $1.6 billion to creditors and Harlow had $169.23 million in liabilities at last report.

Many lenders have opted to go the receivership route after granting forbearance agreements, which allowed for extended payment deadlines that were not met, according to Jeffrey Berger, managing director at TDB Restructuring.

“Two or three years passed, and then it became clear that this was the new normal and things were changing and these loans had to be dealt with in some manner,” he told the Globe.

Pictured: Proposed Harlow project in Vancouver.

Image: Patkau Architects