How Much Should Your Restaurant Pay in Rent?
A 40-seat restaurant on Ossington Avenue in Toronto pays roughly $88 per square foot in base rent. That same concept in Calgary's Kensington neighbourhood might pay $35. And neither number tells you whether the lease will work, because base rent is never the whole story.
Rent is the one cost you lock in before you sell a single meal. Food cost changes with your menu. Labour adjusts with your schedule. But the lease you sign today follows you for five, ten, sometimes fifteen years. Get it wrong and no amount of hustle in the kitchen fixes the math.
Here's what the numbers actually look like across Canada, and how to figure out whether a space is going to build your business or bury it.
What counts as "occupancy cost" (and why base rent lies)
When operators talk about rent, they usually mean the number on the lease. But occupancy cost is the number that matters, and it includes everything tied to the physical space: base rent, property taxes, building insurance, and common area maintenance (CAM) charges.
On a typical Canadian commercial lease (often called a "net" or "NNN" lease), you pay base rent plus your share of three additional charges:
| Cost Component | Typical Range (per sq ft/year) | What It Covers |
|---|---|---|
| Base rent | $20-$90+ | The space itself |
| Property taxes | $2-$8 | Your share of municipal taxes |
| Building insurance | $1-$3 | Landlord's policy on the structure |
| CAM charges | $4-$12 | Parking lot, hallways, snow removal, management fees |
Those additional charges add 20% to 40% on top of your base rent. A space listed at $35 per square foot could cost $50 or more once you factor in the full picture.
For a 1,500-square-foot restaurant, that's the difference between $52,500 a year and $75,000. On a 3-5% profit margin, that gap alone can be the difference between staying open and shutting down.
Better guest experience. Bigger nights. $299. Once.
How much of your revenue should go to rent?
The industry standard is clear: total occupancy costs should land between 5% and 8% of gross revenue.
| Occupancy Cost Range | What It Means |
|---|---|
| Under 5% | Uncommon. Usually means a below-market deal, rural location, or space you own |
| 5-6% | Strong position. Common in suburban and small-town locations |
| 6-8% | Healthy range. Where most urban independents should aim |
| 8-10% | Warning zone. Leaves very little margin for error |
| Over 10% | Danger. At average restaurant margins (3-5%), you're probably operating at a loss |
The National Restaurant Association found that in 2024, fullservice restaurants across North America reported a median occupancy cost of 5.7% of sales. Limited-service concepts came in at 5.2%. Urban locations ran about half a point higher (6.0%) than suburban (5.5%) or rural spots (5.4%).
For Canadian independents, the 30/30/30 rule gives you a rough framework: 30% to food costs, 30% to labour, 30% to everything else (rent, utilities, insurance, supplies, marketing), and 10% left as profit. Rent should be the largest chunk of that "everything else" bucket, but it shouldn't swallow it whole.
What does this look like for a real restaurant?
Let's do the math for a 40-seat independent doing $700,000 in annual revenue (a realistic number for a busy neighbourhood spot in a Canadian city):
| Occupancy % | Annual Cost | Monthly Cost | What's Left for Other Overhead |
|---|---|---|---|
| 5% | $35,000 | $2,917 | $175,000 for utilities, insurance, supplies, marketing, repairs |
| 6% | $42,000 | $3,500 | $168,000 |
| 8% | $56,000 | $4,667 | $154,000 |
| 10% | $70,000 | $5,833 | $140,000 |
| 12% | $84,000 | $7,000 | $126,000 |
At 8%, you're paying $4,667 a month all-in. That's manageable if your food and labour costs are under control. At 12%, you're spending $84,000 a year on the space alone, and the remaining $126,000 of your overhead budget needs to cover utilities ($18,000-$36,000), business insurance ($6,000-$10,000), supplies, marketing, repairs, and everything else. The math gets very tight, very fast.
And remember: most Canadian restaurant profit margins sit between 3% and 5%. On $700,000 in revenue, that's $21,000 to $35,000 in profit. Every extra percentage point you spend on occupancy comes directly out of that margin.
What restaurants actually pay across Canada
Restaurant rents vary wildly by city, neighbourhood, and even by block. But here's a snapshot of where things stand in early 2026, based on commercial real estate data and active listings.
Toronto
Toronto is Canada's most expensive restaurant market. Prime neighbourhood rents range from $40 to $150 per square foot annually, before operating costs.
| Neighbourhood | Base Rent (per sq ft/year) | Notes |
|---|---|---|
| Ossington Avenue | ~$88 | Near-zero vacancy. Multiple offers on every listing. |
| King Street West | $80-$120+ | Premium area near The Well development. High foot traffic. |
| Queen Street West | $60-$100 | Varies widely by block. West of Bathurst is cheaper. |
| Bloor Street West | $65-$80 | Depends on proximity to subway stations. |
| Danforth Avenue | ~$35 | More affordable. Strong local foot traffic. |
| Scarborough/Etobicoke | $25-$40 | Suburban, lower rents, but less foot traffic. |
For a 1,500-square-foot space on Ossington at $88 per square foot, base rent alone is $132,000 a year ($11,000/month). Add operating costs and you're looking at $150,000 to $170,000 annually. You need over $1.8 million in revenue just to keep occupancy at 8%. That's fine for a packed 60-seat spot. It's a death sentence for a 30-seat cafe.
Calgary
Calgary offers significantly lower rents than Toronto or Vancouver, with a restaurant market that's rebounded strongly since 2020.
| Area | Base Rent (per sq ft/year) | Operating Costs (per sq ft/year) | Total |
|---|---|---|---|
| Kensington / 17th Ave | $30-$45 | $12-$18 | $42-$63 |
| Downtown core | $25-$40 | $15-$20 | $40-$60 |
| Suburban strip | $18-$30 | $10-$15 | $28-$45 |
A 1,500-square-foot restaurant in Kensington at $35 per square foot base plus $15 operating costs totals $75,000 a year ($6,250/month). At $700,000 revenue, that's about 10.7% occupancy, which is high. But many Calgary restaurants in that area are doing $900,000 to $1.2 million, which brings the ratio back into the healthy range.
Montreal
Montreal's restaurant rents remain below Toronto and Vancouver, though the Plateau, Mile End, and Old Montreal have seen steady increases.
| Area | Estimated Base Rent (per sq ft/year) | Notes |
|---|---|---|
| Plateau / Mile End | $30-$50 | Popular dining streets command premiums |
| Old Montreal | $40-$70 | Tourist traffic but seasonal swings |
| Saint-Laurent (below Sherbrooke) | $25-$40 | Mixed commercial, more negotiable |
| Verdun / Villeray / Rosemont | $18-$30 | Increasingly popular, still relatively affordable |
| South Shore / Laval | $15-$25 | Suburban, parking-dependent |
Montreal operators also need to factor in Quebec language compliance costs for signage and menus, which add to the total cost of opening in the province.
Vancouver
Vancouver rivals Toronto for the highest restaurant rents in the country, with limited supply driving intense competition for prime spaces.
| Area | Estimated Base Rent (per sq ft/year) | Notes |
|---|---|---|
| Gastown / Yaletown | $50-$90 | Premium dining locations |
| Main Street / Fraser | $35-$55 | Growing restaurant scene |
| Commercial Drive | $30-$45 | Strong foot traffic, more affordable |
| Burnaby / Richmond | $25-$40 | Suburban, growing Asian dining scene |
| Victoria (downtown) | $25-$45 | Smaller market, seasonal tourism |
Other Markets
| City | Typical Restaurant Rent Range (per sq ft/year) | Notes |
|---|---|---|
| Ottawa (ByWard Market / Elgin) | $30-$55 | Government town, steady demand |
| Edmonton | $20-$35 | Lower than Calgary, recovering market |
| Winnipeg | $15-$30 | Most affordable major city |
| Halifax | $20-$40 | Growing food scene, limited supply |
The five questions to ask before you sign
Knowing the benchmarks is step one. Here's how to apply them before committing to a space.
Is this the total cost, or just the starting number?
Always ask for the full occupancy breakdown: base rent, property taxes, insurance, and CAM. Then calculate your occupancy-to-revenue ratio using the total, not just the base. If the landlord quotes $30 per square foot but CAM is another $15, you're really at $45. On a 1,500-square-foot space, that's $67,500 a year, not $45,000.
Can I negotiate a CAM cap?
Uncapped CAM charges are a risk. Property taxes go up, snow removal costs spike, management fees creep. A 3% to 5% annual cap on CAM increases protects you from surprises. Not every landlord will agree, but it's worth asking, especially in slower markets.
What revenue do I need to make this work?
Work backwards from the occupancy benchmark. If the total occupancy cost is $60,000 a year and you want to stay at 8%, you need $750,000 in annual revenue. If your concept realistically does $500,000, you're looking at 12% occupancy, which is the danger zone.
What does the lease escalation look like?
Most commercial leases include annual rent increases, typically 2% to 4% per year, or they reset at market rates every five years. A lease that works today at $4,000 a month could be $5,200 in year eight. Model the full lease term, not just year one.
Is percentage rent on the table?
Some landlords offer a lower base rent plus a percentage of gross sales above a certain threshold (called a "breakpoint"). This can be helpful for a new restaurant with unpredictable revenue. You pay less in the lean months and share the upside in the good ones. The typical structure is base rent plus 5% to 8% of gross sales above the breakpoint.
When to walk away
There's no shortage of great restaurant spaces in Canada. And the operators who survive don't fall in love with a space before running the numbers.
Walk away if the total occupancy cost exceeds 10% of your realistic (not optimistic) revenue projection. Walk away if the landlord won't provide a full operating cost breakdown. Walk away if the lease has no CAM cap and the building is older than your business plan.
Rent is the foundation of your P&L. Get it right and every other cost becomes manageable. Get it wrong and you're fighting an uphill battle from day one, no matter how good the food is.
Your food costs, labour costs, and prime cost ratio all sit on top of rent. If the foundation is shaky, nothing you build on it will be stable.
Sources: National Restaurant Association, CBRE Canada Retail Rent Survey, Statistics Canada CRSPI, ISED Canada Industry Statistics, Restaurants Canada.
When you're ready to take reservations, Trudy's Table is built for Canadian independents.
Frequently Asked Questions
How much should a restaurant pay in rent in Canada?
Total occupancy costs (rent plus property taxes, insurance, and CAM) should stay between 5% and 8% of gross revenue. For a restaurant doing $700,000 a year, that's $2,900 to $4,700 a month all-in. Going above 10% leaves almost no room for profit at typical restaurant margins.
What is the average restaurant rent per square foot in Canada?
It varies widely by city and neighbourhood. Toronto prime areas range from $40 to $150 per square foot per year. Calgary runs $25 to $45, Montreal $18 to $50, and Vancouver $30 to $90. These are base rents before operating costs, which add 20% to 40% more.
What is the 30/30/30 rule for restaurants?
The 30/30/30 rule allocates 30% of revenue to food costs, 30% to labour, 30% to overhead (including rent, utilities, insurance, and supplies), and the remaining 10% as profit. Rent should be the biggest part of that overhead bucket, but not all of it.
What is included in restaurant occupancy costs?
Occupancy cost goes beyond base rent. On a typical Canadian net lease, it includes base rent, your share of property taxes, building insurance, and common area maintenance (CAM) charges for shared spaces like parking lots and hallways. CAM alone can add $4 to $12 per square foot per year.
Should I negotiate a CAM cap in my restaurant lease?
Yes. Uncapped CAM charges can increase without limit as property taxes rise and maintenance costs grow. Negotiating a 3% to 5% annual cap on CAM increases protects you from surprises and makes your monthly costs more predictable for financial planning.