Tenant Resilience Index: Measuring Location Risk Before a Retail Unit Goes Dark

The Tenant Resilience Index is a diagnostic framework for measuring the risk of a retail unit becoming vacant due to local demand deterioration. It takes into account five data layers: demand volume, demand quality, temporal stability, route capture, and competitive pressure.

The index aims to identify vulnerabilities in a unit's location before the tenant requests concessions, refuses a lease renewal, or vacates the property. This extra lead time can be crucial for landlords, as void periods can be costly.

A strong tenant operating from a weak location can still struggle, while a less profitable unit in a more resilient location might weather economic challenges better. For example, two identical retail stores owned by the same national chain may have different levels of footfall and customer demographics. A store situated near a station exit with high weekday footfall from office workers may be more vulnerable to disruptions such as station closures or loss of nearby competitors.

The Tenant Resilience Index goes beyond traditional credit rating systems by focusing on the specific location where the unit operates. It provides a more granular view of external factors that can impact a unit's economics, such as changes in pedestrian flow, demographic composition, and competition from nearby businesses.

By analyzing these five data layers, the index can help landlords and lenders make more informed decisions about the viability of individual retail units, even before a tenant faces financial difficulties.