Stating the obvious, the world is pretty uncertain at present. Because of this, and because commercial property tenants are businesses, it’s increasingly important to be diligent about your tenant choice. We’re not just talking about economic cycles anymore - we’re dealing with artificial intelligence (AI) that’s reshaping entire industries, consumer habits that have been turned upside down, and business models that are likely to become obsolete overnight.

The key to great tenant selection is operate in a niche (location / sector / strategy) where you have more choice of tenants. This is a highly strategic decision that starts well before you have even bought your first property – ultimately supply and demand is the cornerstone of successful commercial investing.

High-Risk Tenant Categories to Approach with Caution
Warning signs of vulnerable tenants could include:
◆ over-reliance on routine tasks
◆ lack of personal relationships
◆ high dependency on physical product sales
◆ resistance to technology adoption

I’ve had a go at guessing some business that may start to suffer as a result of technological changes, and in doing this, I also asked Chat GPT (we may as well embrace this changing world) - so let’s look at what we jointly came up with.

Discretionary Spend Retailers - The classic risky tenants are discretionary spend retailers. These are businesses selling things people want rather than need, and (other than in very niched locations) they are often the first to struggle during tough times.