Retail Strip Center - Requirements to screen tenants

[Abbas H.]

Hi BP Fam,

I'm in Houston, TX working on leasing a 20K sq ft retail strip center. This is my first time screening tenants so I have a few questions.

1. What are the key criteria you use to screen tenants?

2. How have you protected yourself from riskier tenants? Any good practices you have used?

3. How do you manage tenant allowance in a large space? We have a tenant who wants 11K sq ft and has only 1 other location for their business. 

Thanks in advance!

[Herndon Davis]

There are 4 basic ways to screen commercial tenants. I personally call it SFRC

Strategic – Ask basic question concerning their mission, vision. Where they seek to be in 5, 10 years. Current profile of customers/clients, how they market/advertise, and the busiest time of day and seasons for businesses. Are they seasonal and earn 50% or more of their revenue during those times? What are their peak times of doing business during a normal work day? What are their current and projected business hours

Financial – Request P&Ls, Cash Flow statements from the past 2 years. If they can’t won’t provide, then that’s a red flag.

Reputational – Search online reviews like Yelp and others. Review their blog, website, social media. How do they present themselves to clients, customers and to the world. Also check BBB and check the county course records for previous and current lawsuits, judgments, etc.

Client/Customer Experience – Send in secret shoppers at different times to observer their services, professionalism, etc  at their current location. Also do drivebys of their current business to get a vibe of client, where the neighborhood their currently in.

I hope this helps.  I"ll be reposing this in other forums as well.  Feel free to PM if you have questions.  Houston based here!