In recent years, many China-based restaurants in Malaysia close shop within a year or even just a few months in operation.
Chinese food and beverage associations believe this is not a widespread “wave of closures,” but rather a sharp market adjustment within the industry—a normal process of survival of the fittest and cyclical market reshuffling.
Rebecca Tin, who operates a Chinese restaurant in the Sri Petaling commercial district, says she noticed the wave of closures of China-based restaurants beginning late last year.
When rent accounts for 20% or more of total operating costs, some operators fail to survive past three or four months, she said.
Tin, a Malaysian who marries a Chinese national, runs Chineese restaurants in Sri Petaling and Kuchai Lama with her husband. She shared that rents in Kuchai Lama are relatively lower while foot traffic is good, making business decent.
However, after expanding into Sri Petaling earlier this year, the couple encountered significant challenges.
“I used to visit Sri Petaling often and saw shops are fully occupied. But when I searched for premises here last December, I found dozens up for rent or takeover—and almost all of them were restaurants operated by Chinese nationals,” she said.
Leveraging her experience running Chinese eateries and trusting the sheer scale of the Sri Petaling district, she took over a shop previously run by an owner from China to sell Sichuan barbecue.
Rents increase by ~10% annually
According to her, the monthly rent in Sri Petaling’s prime zones range from RM20,000 to RM30,000, while non-prime areas range between RM9,000 and RM15,000, with annual hikes of roughly 10%. By contrast, rents in Kuchai Lama sit at only RM7,000 to RM8,000.
In the food and beverage (F&B) industry, a healthy cost structure caps rent at 5% to 10% of total expenses; a restaurant paying more than 20% of total expenses for rent would be hard to survive.
“We are operating at a loss. Sometimes we consider staying open later into the night, but without customers, we’re better off closing early to save on electricity,” Tin said.
“Imagine this: monthly rent, utilities, and labour cost around RM30,000—not including raw ingredients. Even with a monthly revenue of RM60,000, after deducting costs, you either break even, make nothing, or net a meagre RM2,000 to RM3,000. How can anyone sustain that?”
Tin has cracked her head to improve food quality and step up advertising. She hopes government officials will “check the ground” to understand the plight of operators.
Lin: Marketing strategy is key
Not all Chinese restaurant owners agree that high rent is the final straw.
Mr. Lin, an owner of a China-based restaurant who declined to reveal his full identity, argued that the real key lies in brands, marketing strategies and whether a restaurant can adapt to evolving customer demands.
Lin’s restaurant in Sri Petaling spans 3,000 square feet with a monthly rent of RM34,000. Between last April and May this year, his rent rose by RM4,000.
F&B businesses from China never lack capital or investors, which constantly drives up rents, he said.
“If you can’t accept the price, someone else will. Rents will only continue to go up.”
So how can these Chinese restaurants survive the fierce competition?
“First is branding. Without brand awareness, it’s hard to break into the market,” he said.
Second is customer base and retention. While Sri Petaling has numerous restaurants, traffic congestion and limited parking make it hard to draw patrons from outside the area. Operators must rely heavily on nearby regulars and convert them into repeat customers.
“Here, menus must be constantly updated. Your marketing must also be aggressive to attract diners to check in on social media and take photos. If your interior decor is exquisite, business will boom—even if the food is ordinary,” he said.
Gao Hao Yun: The “de-bubbling” of F&B from China
Gao Hao Yun, President of the Malaysia-China Restaurant Industry Association, stated that F&B from China has transitioned from an era of mushrooming without control into an ea of “refined operations”.
He revealed that closing or ownership transfers of restaurants are concentrated primarily in areas with a heavy density of F&B from China in city centres—such as KLCC, Bukit Bintang and Sri Petaling—as well as heavily populated Chinese suburbs in Selangor like Kota Damansara and Puchong.
Oversupply is the reason for closures, he said as a massive influx of homogeneous Chinese dining concepts—such as Mala hotpot, skewer outlets and Hunan cuisine—has severely saturated the market over the past few years.
“Secondary factors include weak management, fragile supply chains, and a lack of local adaptation, preventing restaurants from attracting and retaining Malaysia’s diverse, multi-ethnic customer base,” he said.
Escalating operational expenses are another factor. On top of rents, the pressures of imported ingredient costs, labour shortages and inflation have pushed many operators over the edge.
“Our association consistently encourages F&B entrepreneurs from China not just focus on authentic flavours, but to prepare for long-term integration into the local Malaysian market,” he said.
Chong Kam Fai: Taking over shops as a new business model
Local Malaysian operators view market adjustments as an opportunity. As restaurants operated by Chinese nationals exit, local business owners step in to take over.
Although rents have been driven up, taking over existing units saves a fortune in renovation costs, said Chong Kam Fai, secretary-general of the Pan Malaysia Koo Soo Restaurants and Chefs Association.
Through association’s mediation, shop takeovers have become a popular entrepreneurial model and a strategy to offset skyrocketing rents. Local operators can save on renovation costs, compensating for high rental fees.
For F&B operators, once rents go up, they rarely come down, he said.
The association currently represents over 2,800 members in Selangor and Kuala Lumpur, with expectations to exceed 3,000 next year, signaling that F&B remains a viable industry.
Despite the rapid mushrooming of restaurants operated by Chinese nationals, Chong believes the government does not need to restrict their entry. F&B is part of an open market. The government’s priority should be regulation and compliance—such as enforcing food safety and licensing rules—rather than direct market intervention.
He suggested that government regulation should instead focus on capping the density of restaurants along individual streets—similar to policies in Australia, Japan, and South Korea—to prevent hyper-concentration and cutthroat competition.
Driven-up rents: crisis or opportunity?
As restaurants operated by Chinese nationals swept through the local F&B scene backed by deep pockets, rumours circulated that whenever investors set their sights on a location, they showered money to secure it, inflating overall rents.
Inflated rents leave small local eateries unable to compete, while operators from China themselves are eventually caught in the backlash.
A local who has operated a restaurant on one of Sri Petaling’s busiest streets for five years, told Sin Chew Daily that her rent was RM10,000 during the COVID-19 pandemic in 2021. Today, it has doubled to nearly RM20,000.
The rise of F&B oeprators from China played a significant role and they were willing to pay premium rents, driving property values up in the entire commercial area.
She highlighted that while rent previously accounted for 15% of her total expenses, it has now surged to 30%.
Ken Tan Chun Hoo: Post-pandemic rents rebound to market rates
Real estate negotiators argue that blaming “Tenants from China for inflating rents” is not entirely accurate, attributing the trend to a mix of pandemic-era lease structures, shifting supply-demand dynamics, and evolving consumer habits.
Ken Tan Chun Hoo, a real estate negotiator, explained that many commercial premises leased during the pandemic were offered at discounted rates by landlords.
“Shops originally valued at RM10,000 per month were rented out for RM7,500 to RM8,000 under ‘2+2’ or ‘3+3’ year leases, with renewal hikes capped at 10%,” he said.
When the pandemic ended in 2022, “revenge spending” took off, prompting many to start businesses.
Demand for commercial shopfronts rebounded rapidly, he said.
Tan noted that upon lease expiration, landlords generally reset terms aligned with prevailing market rates.
To existing tenants, a 50% jump feels like a sudden spike, whereas landlords view it simply as a return to pre-pandemic baselines, he said.
On claims that Chinese businesses inflated rents, Tan believes it is a result of capital competition.
Both local and overseas entrepreneurs compete for prime locations and are willing to pay high rates.
Persistent inflation and “revenge saving”
Tan also observed a recent uptick in tenants from China seeking agents to help transfer or takeover their lease after failing to meet sales expectations, creating a wave of lease surrenders.
He believes that with persistent inflation in 2026, consumer behaviour is shifting from post-pandemic “revenge spending” to “revenge saving.”
Overall retail market demand is expected to slow down, forcing underperforming businesses to exit.
Another real estate negotiator James Chow Kah Fei considers the current market to be in an adjustment phase.
Transaction volumes over recent months reflect a slowdown, though not solely due to Chinese tenants exiting. Broader factors—such as global economic uncertainty, geopolitical tensions, rising fuel costs, and a general slowdown in consumer spending—have eroded business expansion plans and investment confidence.
Focusing on the Bukit Jalil commercial property market, Chow noted an influx of merchants from China seeking premises over the past six months, accompanied by a slight rise in early lease terminations and surrenders.
Using Bukit Jalil as an example, he noted that overall rents have risen by roughly 10% to 15% compared to two or three years ago.
“The Bukit Jalil market hasn’t seen Chinese operators artificially inflating rents. While their entry boosted demand, I estimate their overall market influence at around 20%,” he said.
Gao believes that rental spikes caused by intense competition among Chinese operators are a temporary phenomenon.
“We expect commercial rents to gradually correct to reasonable levels in the coming months,’’ he said.
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