There's a wave of well-capitalized-looking tenants in the market right now — defense tech, AI, robotics — many of them young companies with strong pitch decks and real momentum. Pricing a deal around the wrong read on which of those is which is a genuine risk right now, in both directions: get too generous with an unproven story, or too conservative with a genuinely strong one, and either mistake shows up on the rent roll for years, just look at the life science sector for a recent proof point.
This is the landlord-side mirror of a conversation we have with tenants about renewal leverage — except here, the read you need is about someone else's credibility, not your own position.
A closed funding round is a start, but the number that matters more is runway — how long that capital actually funds the company at its current burn, not the headline raise size. A company eighteen months from needing to raise again is a different underwriting conversation than one that just closed a round sized to get them past their next major milestone. I saw this play out time and time again during my tenure in Silicon Valley during the 2010's.
Signed contracts carry more weight than a pipeline of LOIs or a total addressable market slide. Government and prime-contractor relationships in particular are worth understanding specifically — who the counterparty is, and whether the relationship is a signed award or a hopeful conversation.
Headcount that's already growing — seats actually being filled — is a stronger signal than a hiring plan on a slide. Approved and budgeted is different from projected.
And it's worth knowing who's actually on the cap table and which round the company raised. Serious institutional backing tends to come with real diligence already done on the company; that's not a substitute for your own underwriting, but it's a signal worth weighing.
The read on credibility should show up directly in how the deal gets structured, not just in whether you do it. TI allowance sizing relative to lease term and the tenant's actual balance sheet. Personal or corporate guaranty structures for tenants without the track record yet are ideal, but hard to negotiate into a corporate deal. More likely securitization is from a letter of credit, question is who is it from and what is securitizing that letter. Phased buildout or expansion rights instead of committing capital upfront against growth that's still a projection rather than a fact can muddy an exit. Striking a balance is key.
Being too conservative has its own cost here. Some of these tenants are the real future rent roll of this submarket — the same growth story driving the concentration we've written about elsewhere isn't hypothetical, it's showing up as actual leases getting signed. Blanket skepticism toward every young, well-funded tenant is its own mistake, just a quieter one that shows up as lost deals instead of bad ones.
The point isn't to default to optimistic or default to skeptical — it's an actual underwriting process on the tenant, the same rigor you'd expect them to apply to the building.
— Sach
