Lease and tenant analysis forms the cornerstone of retail due diligence nationwide, involving meticulous review of rent rolls, lease terms, expirations, and tenant creditworthiness to gauge income stability and rollover risks in shopping centers, strip malls, and standalone stores. With retail facing e-commerce pressures and tenant bankruptcies (example with the recent cases like Bed Bath & Beyond remnants), this step identifies revenue gaps from below-market rents or upcoming vacancies, which average 8-10% in secondary markets.

Key Components and Risk Mitigation

Rent rolls reveal effective gross income, percentage rent triggers, and common area maintenance (CAM) recoveries, while triple-net (NNN) lease structures prevalent in 70% of U.S. retail shift expenses to tenants but demand verification of renewal probabilities. Analyzing expirations via a 3-5 year cliff forecast highlights concentration risks, such as 20%+ space turning over in 2027, prompting proactive marketing. Tenant credit checks via Dun & Bradstreet scores and guarantor financials ensure diversified occupancy, safeguarding cash flow amid national trends of experiential retail (e.g., dining, fitness) replacing big-box anchors.

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