When Hosni Emam's landlord near tripled the rent for his Egyptian restaurant Habibi three years ago, he had no choice but to move. Known for its dark alcoves, hookahs and belly dancing, Habibi had flourished for almost a decade on Wellington Street. 'For the first few years it was hard to find a seat. You had to book months in advance and there were people waiting in the street,' Emam reminisces.
He relocated to Lan Kwai Fong and although he no longer has queues forming at his door, business has picked up steam.
'At first I lost a lot of customers, but luckily I placed a sign in Habibi Cafe [a sister restaurant on Wellington Street] saying we had moved,' Emam says. With an extra push from some internet marketing, tables began to fill.
Like most other restaurateurs in the city, rampant rent increases put a strain on Emam's operating costs. The renovation of his new space alone set him back HK$1.5 million. When he opened in his first site in 2000, rent was about 20 per cent of his costs, but today it is up to almost a quarter. Labour costs have also increased to 25 per cent of his expenses and food accounts for 30 per cent. As a result, profit margins have almost halved.
Emam says things were easier when he arrived in Hong Kong in the 1990s. 'I managed to get a six-year lease for Habibi because the lady before us was selling char siu [barbecued meat] so no one wanted to take the site,' he says.
The landlord also offered Emam a reasonable price as the property was blacklisted by locals due to bad fung shui.
'Small players still had a space in the market at that time. We hadn't yet seen big companies,' he says.
The restaurateur enjoyed a period of relatively stable rent until the property was bought by a real estate investor.
With rental prices continuing to climb, stories of uprooted restaurants are becoming increasingly common.
'Landlords have the power to kick out people like me because they know there is someone waiting to take over,' Eman says, citing Epicurean Group's acquisition of 97 Group and Chevalier iTech Holdings' 2006 purchase of Igor's Group as examples of restaurant consolidation.
According to Emam the state of the rental market is having serious effects on the industry - so much so that you can taste it. 'Because of high rent, the quality is no longer as good in a lot of restaurants and people can be disappointed,' he says. Lately he has noticed people gravitating towards the upscale restaurants in hotels in search of an alternative. Emam has a loyal customer base to sustain his business. Others, he fears, may not be so lucky. 'If you open a new place now, it's very hard. Unless you have a good gimmick or a celebrity chef, how can you make it?'