Historically, banks have been characterized as some of the safest single tenant investments due to their impeccable credit rating, name brand recognition, and premier retail locations. However, with the rise of technological advances, e-commerce, and desirability of online consumer preferences, the traditional brick and mortar retail model is threatened to become obsolete. Currently some of the nation’s largest retailers such as JC Penney and Best Buy are trending towards the same fate as Blockbuster Video stores. Just as Blockbuster lost their battle to Netflix, brick-and-mortar bank locations are losing the battle to their own in-house mobile deposit model.
According to CoStar:
- US Banks shuttered a total of 1,555 branches in the first 9 months of 2016, which comes out to be roughly 3.9 million square feet of vacated bank real estate.
- Wells Fargo has been quoted to shutter 400+ sites in the next two years. The bigger the bank, the more prevalent the trend.
- Capital One and Citibank started last year (2016) with 800+ branches and have since consolidated or closed 7% of their sites.
- Bank of America announced that they have shut down almost 1,500 locations in the last couple of years and have plans to continue the closures.
- SunTrust announced as recently as February 1st that they plan to close 10% of their branches over the next two years. Within the past week, they have taken a more aggressive approach announcing that they will be accelerating these closures/consolidations to 7% by June of 2017. “This is even more notable when considering that over the past five years, we had already reduced the size of our network by 17%,” said Bill Rodgers, Chairman and CEO of SunTrust Bank.
It is astonishing how oversaturated the retail bank truly is. Multiple counties have more than 70 branches within them and 20 or more sites within the same zip code.
To give an example, recently in underwriting a Bank of America in Dallas, we discovered that the numbers speak for themselves. According to the Federal Deposit Insurance Corporation, last year, Bank of America closed down 8 locations in Dallas County which is 11% of the total Dallas County Market. Bank of America has announced as recently as February 1st that they are still aggressively consolidating branches.
The goal of any investment is to be ahead of the curve. At Matthews Real Estate Investment Services™, we assist our clients by providing them the resources to make an informed investment decision with the goal of preserving equity, security, and even increasing cash flow. With these eye opening statistics, we highly advise considering looking into the current market position and what is progressing with respect to your specific retail bank investment.
Given today’s current real estate market, the value of this particular asset is at or near its peak and we are seeing buyers paying a strong premium. Additionally, with the surrounding market conditions, rising cap rates, interest rate hikes, now is the best time to receive a current prospectus on your investment direct from the market experts.
Give Sam Silverman, Retail Bank Specialist, a call at your earliest convenience at 214-692-2211 for a no-obligation market analysis.