The recent data released from Restaurants Canada’s Consumer Dining Index (CDI) offers a wealth of positive indicators for the Canadian restaurant industry, and by extension, the commercial real estate sector. This welcome news comes at a critical time for business owners and property investors alike.
Understanding the Consumer Dining Index and Its Recent Upswing
The Consumer Dining Index, a key metric developed by Restaurants Canada, tracks how often Canadians purchase meals or snacks from foodservice establishments. Following a period of volatility, we’re now seeing considerable improvement in recent months. According to the latest reports, the CDI rose sharply to 89.8 in May 2025, up from 87.0 in April—representing a significant 7.2-point year-over-year increase from May 2024’s reading of 82.6.
This upward trend indicates not just a return to pre-pandemic dining habits, but in some segments, an actual expansion of consumer spending on dining experiences. The dinner daypart has shown particularly robust growth, with Millennials and Gen X consumers (aged 35-54) driving the numbers upward by reporting weekly dining out at unprecedented rates—56% and 54% respectively.
Key Factors Behind the Positive Trend
Several factors have contributed to this recovery. Most notably, the recent GST/HST holiday implemented in December 2024 resulted in an impressive 18% increase in seated dining nationwide compared to the same period in 2023. Ontario restaurants performed exceptionally well during this period, with a remarkable 23% boost in traffic.
The warmer spring weather has also played a role, encouraging more Canadians to venture out for social dining experiences after a typically restrictive winter season. Additionally, the relative stabilization of food inflation rates in recent months has helped restore consumer confidence in restaurant spending.
Perhaps most interestingly, geopolitical tensions have inadvertently benefited the Canadian restaurant sector. With travel to the US becoming more expensive due to exchange rates and trade disputes, many Canadians have redirected their leisure spending domestically, creating what some industry analysts are calling a “restaurant staycation effect.”
Commercial Real Estate Implications of Rising Restaurant Traffic
For those of us in the commercial real estate sector, these dining trends translate directly into tangible property market impacts. The improved performance of restaurants has created a cascade of positive effects throughout the commercial property landscape.
Increasing Demand for Restaurant-Ready Spaces
One of the most notable impacts has been the heightened demand for restaurant-ready commercial spaces. Properly positioned restaurant properties are now experiencing significantly shorter vacancy periods and commanding premium rents compared to just six months ago.
This trend has been particularly evident in food-anchored retail strips, which have emerged as the top preferred property type across all commercial real estate asset classes in Q1 2025, according to Altus Group’s latest market barometer. In fact, their research shows that retail sector values increased by approximately 4.1% year-over-year as of Q1 2025, outperforming several other commercial real estate categories.
Cap Rate Compression and Valuation Impact
The restaurant industry’s positive performance metrics have translated into meaningful changes in commercial real estate valuations. Cap rates have compressed by approximately 0.5% to 1% in major Ontario markets over the past six months, reflecting increased investor confidence in the stability and growth potential of restaurant-tenanted properties.
For property owners with restaurant tenants, this means higher asset values and potentially more favourable refinancing options. For investors looking to enter the market, it signals stronger competition for quality assets but also suggests that well-chosen restaurant properties may offer strong long-term appreciation potential.
Regional Hotspots for Restaurant Real Estate Investments
Not all markets are experiencing this boom equally. The data shows distinct regional variations that savvy investors should note when considering restaurant-related commercial real estate opportunities.
Urban vs. Suburban Dynamics
While downtown cores in major cities like Toronto continue to face challenges related to hybrid work models (with lunch traffic still down 20-30% from pre-pandemic levels in some business districts), suburban restaurant locations are thriving. The shift in consumer behaviour favouring dining options closer to home rather than near workplaces has created new investment opportunities in previously overlooked suburban nodes.
Vancouver leads the pack for food-anchored retail investment, followed closely by Calgary and Montreal, according to Altus Group’s latest investor preference rankings. Toronto remains active but faces more competition and generally higher entry prices.
Secondary Markets Gaining Momentum
Interestingly, the CDI data shows above-average growth in secondary markets such as Hamilton, Guelph, and Kitchener-Waterloo. These areas are benefiting from both population migration patterns and relative affordability compared to Toronto proper, creating compelling investment opportunities for restaurant properties at more attractive price points.
Cities with strong tourism draws, such as Niagara, are also performing exceptionally well as domestic tourism has increased, partly due to the aforementioned reduction in cross-border travel. This creates particularly strong seasonal cash flows for restaurant operators in these markets.
Evolving Restaurant Concepts Driving Real Estate Decisions
The CDI data reveals not just how often Canadians are dining out, but also shifts in the types of establishments they prefer. These changes in consumer preferences have significant implications for the types of commercial spaces in demand.
The Rise of Experiential Dining
Millennial and Gen X consumers—the demographics driving the CDI growth—show a strong preference for experiential dining venues that offer more than just food. Restaurants that combine dining with entertainment elements, unique atmospheres, or cultural experiences are seeing the strongest growth.
From a real estate perspective, this means increased demand for larger footprints that can accommodate these expanded concepts, as well as properties with distinctive architectural features that contribute to the experience. Sustainable design features are increasingly becoming not just nice-to-have but essential elements for restaurants targeting these demographic groups.
Investment Strategies for Restaurant Real Estate in the Current Market
Given the positive trends in the CDI and their implications for commercial real estate, we’re seeing several successful investment strategies emerge in the current market environment.
Retail Conversion Opportunities
With traditional retail continuing to face challenges from e-commerce, the conversion of retail spaces to restaurant uses represents one of the most compelling investment strategies in the current market. Former big-box stores retrofitted with commercial kitchens and patio spaces are yielding some of the highest returns when located on high-visibility corridors with adequate parking and utilities access.
Such conversion projects have increased by over 40% year-over-year according to industry reports, driven by the “historically low availability” of purpose-built restaurant spaces nationwide. This scarcity is pushing values upward despite some economic uncertainties on the horizon.
Strategic Tenant Selection in Multi-Unit Properties
For investors holding multi-tenant retail properties, strategic tenant curation has become increasingly important. The data shows that restaurant anchors can drive significant foot traffic to surrounding retailers, with the strongest synergies occurring between dining establishments and complementary retailers like specialty food stores, boutique retailers, and service businesses.
Properties that successfully integrate restaurants with these complementary tenants are showing superior overall performance metrics, including higher total rent per square foot and lower vacancy rates across all units.
Challenges and Risks Despite Positive Trends
While the CDI data paints a largely positive picture for restaurant real estate, several challenges and risks remain that investors and property owners should monitor carefully.
Labour Market Constraints
Despite the positive consumer spending trends, restaurants continue to face significant labour challenges. The latest industry surveys show that over 75% of operators report difficulty staffing their establishments, which can constrain growth and impact operational viability even when consumer demand is strong.
For property owners and investors, this underscores the importance of carefully vetting tenant financial health and operational capabilities beyond just concept appeal. Restaurants with strong staffing models and employee retention strategies represent lower risk tenants even in high-demand locations.
Inflation and Cost Pressures
While consumer spending has increased, so have operational costs for restaurant businesses. Food input costs remain elevated despite some recent moderation in inflation rates, and rising minimum wages across several provinces continue to put pressure on restaurant financials.
These cost pressures can impact restaurants’ ability to sustain rent payments, particularly in higher-cost locations. Properties with favourable rent-to-sales ratios and flexible lease structures may offer better risk-adjusted returns in this environment.
Looking Ahead: Forecast for Restaurant Real Estate
Based on the current trajectory of the Consumer Dining Index and broader economic indicators, we can make several projections for the restaurant real estate sector in the coming 12-24 months.
Continued Growth in Food-Anchored Retail
The strong preference for food-anchored retail strips among investors is likely to continue, with cap rates potentially compressing further as competition for these assets increases. According to market projections, we may see an additional 25-50 basis point compression for prime assets in top markets by year-end if current CDI growth trends continue.
This makes early identification of emerging restaurant districts and strategic acquisition in these areas particularly valuable. Areas undergoing residential densification but currently underserved by quality restaurant options represent especially compelling opportunities.
Adaptive Reuse Acceleration
The conversion of non-restaurant commercial spaces to food service uses is expected to accelerate, with particular focus on office-to-restaurant conversions in downtown cores and retail-to-restaurant conversions in suburban areas. Architects and designers specializing in these conversions report record inquiry levels, reflecting the strength of this trend.
For investors with value-add strategies, acquiring properties with conversion potential ahead of this wave could generate substantial returns, particularly if timed to coincide with further improvements in the Consumer Dining Index.
Practical Implications for Industry Stakeholders
The positive trajectory of the Consumer Dining Index has different implications for various stakeholders in the commercial real estate ecosystem.
For Property Owners
If you currently own commercial properties with restaurant tenants, now may be an opportune time to:
- Review lease structures to ensure you’re capturing appropriate percentage rent if sales are increasing
- Consider strategic property improvements to support tenant success and justify rent increases at renewal
- Evaluate refinancing options while restaurant performance metrics are strong and interest rates remain relatively favourable
- Assess your tenant mix to maximize complementary traffic patterns between restaurants and other businesses
For Investors Looking to Enter the Market
For those considering investment in restaurant-tenanted properties or development of restaurant spaces, current conditions suggest:
- Focusing on areas with strong demographic alignment to growing CDI segments (particularly areas with high concentrations of Millennials and Gen X consumers)
- Targeting properties with conversion potential from underperforming retail uses to restaurant uses
- Considering secondary markets where cap rates may be more favourable despite strong CDI growth
- Partnering with experienced restaurant operators who understand how to capitalize on the current consumer spending trends
The positive momentum in Restaurants Canada’s Consumer Dining Index represents a significant opportunity for commercial real estate investors focused on the hospitality sector. While challenges remain, the overall trajectory points to sustained growth and healthy returns for well-positioned assets in this space.
As the restaurant industry continues its post-pandemic evolution, the real estate that supports it will likewise transform, creating both challenges and opportunities. Those who closely monitor these trends and position their investments accordingly stand to benefit substantially from the ongoing recovery and expansion of Canada’s vibrant restaurant sector.
For further insights on maximizing returns in restaurant real estate investments, explore our latest market reports or consult the full Consumer Dining Index data from Restaurants Canada to inform your investment strategy.
Frequently Asked Questions
What is the Consumer Dining Index (CDI) and why is its recent increase significant?
The Consumer Dining Index (CDI) is a key metric from Restaurants Canada that tracks how often Canadians purchase meals or snacks from foodservice establishments. In May 2025, the CDI jumped to 89.8 from 87.0 in April, marking a notable 7.2-point year-over-year gain from May 2024. This upswing signals not only a return to pre-pandemic dining habits but also points to expanding consumer spending on restaurant experiences, especially among Millennials and Gen X diners.
How has the CDI’s growth impacted demand for restaurant real estate?
The surge in CDI has led to increased demand for restaurant-ready commercial spaces. Properties suited for restaurant use are experiencing shorter vacancy times and higher rents than six months ago. Food-anchored retail strips are especially sought after, and retail sector values have climbed by about 4.1% year-over-year as of Q1 2025, outperforming several other commercial property types.
Which regions and property types are seeing the biggest benefits from rising restaurant traffic?
Suburban areas and secondary markets like Hamilton, Guelph, and Kitchener-Waterloo are experiencing above-average growth, benefiting from population shifts and relative affordability compared to major cities. Vancouver, Calgary, and Montreal are top choices for food-anchored retail investment, while downtown cores in cities like Toronto are still challenged by hybrid work trends affecting lunch traffic.
What restaurant concepts are driving new real estate trends?
Experiential dining—venues that offer entertainment, unique atmospheres, or cultural themes—are seeing the strongest growth, especially among Millennials and Gen X. There’s also sustained demand for ghost kitchens and hybrid models that blend dine-in with delivery, leading to demand for larger or more flexible spaces, sometimes in non-traditional locations like industrial conversions.
What risks should investors and property owners watch for despite positive trends?
Despite strong consumer demand, labour shortages remain a significant challenge, with over 75% of operators struggling to staff their restaurants. Rising operational costs—especially food input prices and minimum wages—can also threaten restaurant viability and rent sustainability. Careful tenant vetting and flexible lease structures are crucial to mitigate these risks in the current environment.
