Prudent Tenants Dig into Backgrounds and Capital Positions of Landlords

If leasing due diligence is like passing through airport security, one could say that tenants usually endure the equivalent of full-body scans and pat-downs while landlords sail through the “fast lane.”

Historically, prospective office and industrial tenants have undergone close scrutiny from developers and landlords to assess their creditworthiness. Yet would-be tenants have usually been more concerned with lease rates, operating expenses, tenant improvement (TI) allowances and other issues, often paying scant attention to the financial position—or even the identity—of their future landlords.

Today, however, with many properties struggling financially, there is heightened risk that owners will fail to perform—and that can be disastrous for tenants. That is why prudent tenants should take a much closer look at the backgrounds and capital positions of potential landlords and their buildings.

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