Leasing procedure in a nutshell
While it certainly isn’t easy, renting a shop isn’t as difficult as it looks. It can be summarised into the following steps:
- First, contact a real estate agent or broker to inquire about available properties nearby, or visit preferred locations to see if there are vacant locations up for rent.
- Arrange a visit to your preferred spot with a real estate agent. You want to observe the area by paying attention to the location, footfall and neighbouring shops. Know what are the amenities and if there are any restrictions regarding that location.
- After you have decided where to rent, contact the landlord to discuss the details of your contract. Usually, these details include lease term, rent, rent-free period, handover date, contract renewal terms, renewal rights, early termination clauses,and clarify the responsibility for miscellaneous expenses such as rates, management fees, utilities, internet fees, and property maintenance costs.
- Once both parties have agreed on the terms and the signing date of the contract, a lawyer drafts the contract and everyone signs the contract to complete the leasing process.
If you are working with a real estate agent who provides professional assistance, you may encounter fewer problems. However, to protect your rights, you are advised to have some basic knowledge and understanding of the leasing process.
Calculating hidden costs to fit your budget
What are the specific costs involved in renting and opening a shop in Hong Kong? Let's take a look:
Expense itemsApproximate costCommission for real estate agenciesOne month's rentUsually split equally between the landlord and tenant; will be adjusted according to the market statusLegal feesLawyers are responsible for drafting contracts and overseeing the signing process.Usually costs a few thousands to HK$10,000Rent and depositTenants typically need to pay a two-month deposit plus one month's rental payment in advanceStamp dutyUsually costs 0.25% to 1% of the total amount for renting the placeProperty rates and government rentUsually, The tenor is responsible for Government Rent while the tenant is paying Property RatesThis is subject to the contractManagement and promotion feesBig shopping malls might charge management or promotional fees.Air conditioning feeDepends on the actual usageGas, Water, and Electricity Fees and DepositsDepends on the actual usage, business scales and store spaceFire Insurance (Building Insurance)Usually Fire insurance is brought by the tenor or management company of the locationThe price of that insurance depends on the size of the location and the expected costs of reconstruction in the case of fire.General insuranceUsually covers whatever’s being owned by the tenant, like cash, renovation, decorations and any equipment. Due to the nature of it, the tenant is often the one responsible for buying insurance. There’s also third party insurance that insures against any accidents or financial loss incurred by the shop towards customers.Licence feesDepending on the actual business, you might be required to apply specific licences such as Light Refreshment Restaurants (LRR), Restaurant Licences or Liquor PremisesOperational costsOther miscellaneous costs including supplies, hiring staff and renovation.
| Expense items |
Approximate cost |
| Commission for real estate agencies |
One month's rent
Usually split equally between the landlord and tenant; will be adjusted according to the market status |
| Legal fees |
Lawyers are responsible for drafting contracts and overseeing the signing process.Usually costs a few thousands to HKD10,000 |
| Rent and deposit |
Tenants typically need to pay a two-month deposit plus one month's rental payment in advance |
| Stamp duty |
Usually costs 0.25% to 1% of the total amount for renting the place |
| Property rates and goverment rent |
Usually, The tenor is responsible for Government Rent while the tenant is paying Property RatesThis is subject to the contract |
| Management and promotion fees |
Big shopping malls might charge management or promotional fees. |
| Air conditioning fee |
Depends on the actual usage |
| Gas, water, electricity fees and deposits |
Depends on the actual usage, business scales and store space |
| Fire insurance (Building insurance) |
Usually Fire insurance is brought by the tenor or management company of the locationThe price of that insurance depends on the size of the location and the expected costs of reconstruction in the case of fire. |
| General insurance |
Usually covers whatever’s being owned by the tenant, like cash, renovation, decorations and any equipment. Due to the nature of it, the tenant is often the one responsible for buying insurance. There’s also third party insurance that insures against any accidents or financial loss incurred by the shop towards customers. |
| License fees |
Depending on the actual business, you might be required to apply specific licences such as Light Refreshment Restaurants (LRR), Restaurant Licences or Liquor Premises |
| Operational costs |
Other miscellaneous costs including supplies, hiring staff and renovation. |
Digital Readiness: Maximising Your High-Rent Space
Given that rent is your highest fixed cost, merchants have to find ways to generate revenue. This is where your digital operations bridge the gap.
T+1 Settlement for Cash Flow
Renting a store in Hong Kong drains your initial capital through security deposits and renovation. To stay afloat, you need your sales revenue quickly, especially for small businesses. This is where settlement speed is important, as a slower settlement speed of T+3 or T+5 could affect your cash flow, which may impact decisions on operational efficiency and business development.
This is where a single smart terminal, like the KPay Smart Terminal, can help with your cash flow:
- Accepts 19 major payment methods seamlessly on one portable device.
- No subscription fees, annual fees or terminal rental fees
- T+0 settlement delivers faster access to cash flow and liquidity, significantly boosting operational efficiency.
- 24/7, 365-day customer support to ensure merchants get up and running quickly should any issues occur.
With KPay Terminal Pro, you can reduce counter clutter, accept multiple payment methods, and have peace of mind when it comes to settlement, letting you focus on other important aspects of the business.
Scan to Order (F&Bs)
For F&Bs renting a small space, you can’t afford to waste room on a large cashier counter. By using Scan to Order QR codes, it allows customers to use their own smartphones to browse your menu or catalog and place orders. This helps with:
- Labor Efficiency: By allowing customers to order via QR code, you reduce the need for "order-taking" staff. This means that you can channel your manpower to where it matters the most. For scan-to-order systems that also support making payments at the table or pre-paying, it can help to speed up the payment process as well.
- Increased Revenue: Digital menus allow for high-quality visuals and automated upselling prompts, which consistently results in a higher Average Order Value (AOV) compared to traditional paper menus.
Opening the Doors with Confidence
For merchants looking to rent a store for their physical storefront, the path to profitability in a high-cost environment lies in balancing your fixed costs and variable costs. While rent remains your highest fixed cost, often accounting for up to 30% of overheads in prime areas, success hinges on minimising your variable costs—particularly labor and operational friction—through digital integration. By adopting a Scan to Order system, you effectively optimise your service capacity, allowing a lean team to manage high-volume turnover during peak periods. Simultaneously, consolidating your digital payments into a unified gateway reduces hidden processing fees and manual reconciliation hours.
This means that even as pressure from fixed rental persists, your lowered operational costs and increased average order value ensure your business stays resilient and revenue-ready.
The Importance of Store Location
Securing a physical storefront is amongst the most expensive decisions a business owner in Hong Kong will make. With high retail rents in prime areas like Tsim Sha Tsui and Causeway Bay, understanding the nuances of renting a store in Hong Kong is critical to your F&B or retail store's survival.
Two of the key aspects of renting a store are location and rental costs. For many merchants, fixed rental costs often consume 20-30% of gross revenue. Additionally, negotiating a lease involves complex legal checks, financial planning, and knowing how to mitigate future risk.
This guide provides a step-by-step framework to navigate Hong Kong's rental landscape, from sourcing for a location to maximising your space.
Understanding the Market
Before you browse listings, decide which type of location fits your business model:
Before you browse listings, decide which type of location fits your business model:
- Prime High-Street Shops (Ground Level): These are the most iconic retail spaces in Hong Kong, located directly on the street level in core districts like Causeway Bay, Tsim Sha Tsui, and Central.
- Best For: Luxury goods, flagship fashion stores, and high-turnover F&B (like bubble tea or pharmacies).
- Key Characteristic: Extremely high foot traffic and visibility, but also the highest rents in the world.
- The "Side-Street" Hack: Small units on side streets (e.g., Peel Street in Central or Paterson Street in CWB) offer the same vibe at roughly 40-60% lower costs.
- Premium Shopping Malls (Integrated): Hong Kong is famous for malls that sit directly on top of MTR stations (e.g., IFC, Harbour City, Elements, K11 MUSEA).
- Best For: International brands, lifestyle concepts, and upscale dining.
- The Catch: Malls often charge Turnover Rent (a base rent plus a percentage of your monthly sales). They also have strict "House Rules" regarding your store's fit-out and opening hours.
- Hidden Cost: You will likely pay "Marketing Fees" for shared mall advertisements.
- Neighborhood Arcades & Housing Authority Malls: These are smaller, community-focused malls located in residential hubs like Shatin, Tsuen Wan, or Tseung Kwan O.
- Best For: Essential services, local grocery, bakeries, and family-oriented retail.
- Advantage: Highly stable customer base. Residents walk through these arcades daily to get to the MTR. Rents are significantly lower than prime districts.
- Ginza-Style / Upstairs Shops: Unique to Hong Kong's verticality, many retail stores (salons, cafes, boutiques) operate on the 1st to 20th floors of commercial buildings.
- Best For: Destination-based services (hair salons, private kitchens, studios) where customers find you via social media rather than walking past.
- Advantage: Low rent per square foot compared to street level.
- Industrial Buildings (Converted Retail): In areas like Kwun Tong, Lai Chi Kok, and Wong Chuk Hang, former factories have been converted into trendy creative hubs.
- Best For: Coffee roasters, fitness studios, furniture showrooms, and craft workshops.
- Compliance Note: You must check the Permitted Usage of the building. Running a pure retail shop in an industrial zone without a "Change of Use" or temporary waiver can lead to legal issues.
It's important to analyse foot traffic, demographics, and competitor presence for the locations you have in mind and understand how they align with your business goals. The median retail rent in Hong Kong fluctuates significantly by district, but overall high-street rents average approximately HK$100 to HK$450 per square foot per month, while neighborhood shopping centers typically range from HK$40 to HK$80 per square foot.
Tip: Use your projected Average Transaction Value (ATV) to calculate the footfall needed to reach your break-even points.
