Tenant Underwriting
The comprehensive due diligence process of qualifying prospective tenants by evaluating their creditworthiness, business viability, and fit for a property.
Definition
Tenant underwriting in small bay industrial is a people-centered process that extends beyond spreadsheets. Most small bay tenants are small business owners who built their companies from the ground up—they may not have polished financials, but they're often transparent about revenues, expenses, and operations. The underwriting process typically includes credit analysis, reference checks with previous landlords, verification of intended use against zoning requirements, and assessing the tenant's long-term viability. Small business tenants often have strong relationships with local lenders and face high relocation costs due to custom buildouts and proximity to employees, making them more likely to stay long-term. When problems arise, these owner-operators are typically eager to find solutions and work with their landlords rather than abandon their investment.
Example
An HVAC company applies for a 2,000 SF unit. The landlord calls their previous landlord who confirms 3 years of on-time payments. The owner explains they're relocating because they've outgrown their current space—a positive sign of growth. The landlord verifies the property is zoned for their equipment storage needs and that the electrical service supports their requirements.