Retail Landlords Need to Underwrite Their Tenants’ Customer Base, Too – Commercial Observer
Landlords underwrite the retail tenant. But they almost never underwrite the tenant’s customer. They should.
That gap costs landlords money, and it is fixable before a listing goes live.
The standard leasing process is too reactive: Review comparable rents, post the space on Crexi and LoopNet, wait for responses, and then vet an operator’s finances.
None of that tells you whether enough of that retailer’s customers live near the space. If they do not, the risk rises of tenant failure, months of vacancy, and another round of commissions and negotiations.
The better approach is to flip the process. Instead of waiting to see who shows up, start by studying who lives near the space. How do nearby households spend? Which categories over-index locally? Does the neighborhood support an everyday concept, a destination brand, or something in between?
Answer those questions first, and you can define the customer already walking the neighborhood’s streets. Then, identify the brands that serve that customer and approach them directly about the vacancy. Proactive outreach can reduce days on market and the vacancy costs that come with them.
Consider a hypothetical vacant restaurant at Rivington and Ludlow streets on Manhattan’s Lower East Side. I analyzed the 2026 Esri Consumer Spending Survey and Esri Market Potential data for the area within a five-minute walk. Esri’s modeled data draws on consumer surveys, demographic segmentation and household spending patterns. It is directional, not a record of observed transactions.
Esri estimates that households in that walking area spend $50,243,250 annually on food and beverages away from home, or about $5,043 per household.
The market-potential data then sharpens the picture. Some 20.4 percent of adults in the area visited a fine-dining restaurant in the previous six months, an index of 124, or 24 percent above the U.S. average. Among fine-dining consumers, 29.01 percent spend more than $200 a month. Among adults who visited fine dining in the previous 30 days, 51.42 percent went at least twice. That suggests a local market with both spending power and repeat demand, rather than one reserved only for special occasions.
The preferences are just as revealing. Of adults in the area, 66.87 percent agree that eating out is about the experience, 8 percent above the national average, while 74.42 percent like food from different cultures, 9 percent above average. Among local households, 13.93 percent purchased organic meat in the previous six months, 31 percent above the national average. And 12.09 percent of adults drank wine at a restaurant in the previous 30 days, 30 percent above average.
Those national comparisons use an index with 100 as the baseline. For example, 24 percent above average means an index of 124, not 24 percentage points higher. The spending and repeat-visit figures do not have national benchmarks in this dataset, so they should not be presented as over-indexing.
Taken together, the data points toward an upscale, wine-forward restaurant with a quality-ingredient menu and an experience strong enough to reward repeat visits. That is a more useful prospecting hypothesis than simply posting “restaurant space available” and waiting.
None of this replaces the underwriting landlords already do. Before pursuing that tenant profile, you still need to ask whether nearby restaurants already satisfy the demand, whether the space can support the kitchen, venting, seating and liquor license the concept requires, and whether the operator has the experience and capital to execute.
Customer analysis answers a different, often overlooked question: Does this operator’s customer actually exist at this location?
That matters. An over-indexed, high-spending, repeat-visiting customer base puts an operator in a stronger position to generate sales that support the landlord’s rent. Brokers can perform this research for landlords before a listing goes live. They can also package the findings for prospective tenants as evidence for expanding into the vacancy.
Landlords already underwrite the tenant. It is time they started underwriting the tenant’s customer, too.
Mark Kvetkovskiy is the owner of Rova Real Estate and a broker who represents only landlords.
