3 Ways to Mitigate Loss with Data-Backed Tenant Screening


Commercial real estate owners are the true bearers of burden from loss due to tenant vacancy and/or damage, and there are few things more frustrating for owners to see than a $0 where rent income was projected through a five-year lease term. How often do owners shake their heads and wonder, How can I find the best tenants to honor lease terms and take care of my assets?

While it is true that there are few guarantees in life, the industry of tenant screening has made significant advances in data-backed technology in order to mitigate losses from tenant turnover and leasing. The days of a three-pronged credit check and calling on references have been replaced with more reliable, far-reaching data streams that tell a more accurate and lease-specific story. Owners and CRE professionals now have access to tools that assess not only credit-worthiness but also tenant or lease worthiness. New streams of data, real-time access, and innovative software design is paving the way for data-backed tenant screening to directly and profitably impact CRE bottom lines.

What to expect in tenant screening using advanced data-backed tech

  1. The basic background check

For most CRE landlords, background checks are still a good starting point. This process includes identification verification—an increasingly important factor in the industry—as well as public records analysis and credit reports. Unlike residential real estate, which for years relied on Equifax, Experian, and/or Transunion, commercial real estate now has automated tools for background checks.   

  1. The enhanced income-to-rent factor

Owners should have reliable analysis of not only credit history and public records, but also financial statements of prospective tenants. In the past, CRE professionals might have taken hours or days to analyze a potential tenant’s financials. With advanced data systems available in today’s market, products designed for tenant screening can give more critical insight into tenant’s likelihood to pay rent on time and for the duration of the lease.

  1. Assessment of tenant/lease risk

This is where the tenant screening process, now more than ever, is separating the winners from the losers.  Look for innovative companies that provide unbiased, extensive risk assessments. (RE)meter, for example, uses data from the IRS, Department of Labor and the Census Bureau and combines it with a tenant’s financials, the NAICS Code and lease terms of the deal” to produce a lease risk assessment.  

When a tenant goes south and a property experiences vacancy, it is the owner who ultimately and literally pays the price. Operating and capital expenses flow in and out of an owner’s portfolio regardless of its occupancy. This is why tenant screening plays such a crucial role in the commercial real estate industry.  The innovation that has evolved over the last decade in this area alone can make a significant impact in your CRE portfolio. By leveraging the advanced, data-backed technology and best practices in the industry, owners can mitigate loss and increase the value of their asset(s). CRE owners who rely solely on traditional tenant screening processes can open themselves up to risk in both the short and long term.