How much rent can your shop afford? Cafe, retail, pharmacy, clinic

Rent-to-sales ratio is your monthly rent divided by your monthly sales. The best Malaysian anchor is Pavilion REIT: at its 10th AGM (30 Mar 2022) management put F&B occupancy cost, meaning rent and charges divided by sales, at 10% to 15% before the pandemic. Use 10% to 15% as a rule of thumb for a cafe, check retail against its margin, and work out pharmacy and clinic rent from break-even rather than a fixed percentage.

Our rent affordability calculator does every sum below in one screen.

Take the rent plus any charges you pay to the landlord (service tax where the landlord is registered, service charge, quit rent recharges), then divide by expected monthly sales.

• RM 12,000 rent and RM 100,000 sales: 12%.
• RM 12,000 rent and RM 80,000 sales: 15%.

The ratio is only as good as your sales estimate. Build it from seats, turns and average bill for F&B, or from footfall, conversion and basket size for retail.

For a cafe, 10% to 15% is the band to aim for. That is the pre-pandemic mall F&B figure from Pavilion REIT; during the pandemic it rose to 18% to 25%, which most operators could not live with for long. A street shop has no mall service charge, so if your rent alone is already at 15%, you have no room left for charges and a slow month. See the cafe trade page for the shop features a cafe needs.

It depends on the margin. The same Pavilion REIT summary put high-end fashion at about 10% or single digits, and local fashion at 20% to 25%. Those are mall figures for fashion, not a rule for every shop. A retailer selling goods on a thin margin has less left after cost of goods, so it can carry a smaller share of sales as rent than a high-margin trade.

We have not found a published Malaysian rent-to-sales figure for pharmacies, so we do not quote one. A pharmacy buys stock, so its gross margin is lower than a cafe's, and much of what is left goes to a registered pharmacist's salary. Start from break-even (below), not from a percentage. The pharmacy trade page covers the units that suit the trade.

Again, there is no published Malaysian benchmark. A clinic sells mainly services, so cost of goods is lower, but doctor and nurse salaries are a large fixed cost. Two clinics with the same sales can afford very different rents depending on how many doctors they carry. Use break-even and see the clinic trade page.

Divide the rent by your target ratio: RM 15,000 at 15% needs RM 100,000 a month, and at 10% it needs RM 150,000. That is RM 3,300 to RM 5,000 a day over 30 days, every day, including the quiet Monday.