Financial institutions and banks, like other major companies, are re-thinking their retail real estate strategy with an eye on tweaking the number of bank branches in their portfolio. That may ultimately lead to a downsizing of their footprints in Houston and throughout the country.
From 2010 to 2017, the number of retail bank branches declined by 108 locations in Houston, according to JLL’s latest 2018 Branch Banking Report. JLL reports that 32 of those Houston branches closed from 2016-2017 alone.
In North Texas, 140 branches closed between 2010 and 2017, JLL reports.
"Bank branches are declining as online banking becomes widely adopted and having an old-fashioned branch on every corner doesn’t work," Walter Bialas, a vice president and director of research at JLL, told the Business Journal.
"Instead of the bank with the most branches winning, banks are accessing their customers’ needs and are starting to whittle down the number of branches they have," he added.
Nationally, retail bank branches have declined by 3,388 locations in the last seven years, or about 7.9 percent of the total banking inventory in the country, according to the JLL report. The number of U.S. branches declined from 91,900 in 2016 to 89,900 in 2017, representing a 2.2 percent decline.
There are an estimated 850 vacant branches throughout the U.S. in prime retail locations, each with an average footprint of about 3,960 square feet. In all, there’s an estimated 3.4 million square feet of vacant space tied to vacant bank locations.
That gives developers an opportunity to rethink banking sites and transform them into some other kind of space, Bailas said, adding that new uses could include fitness centers, retail centers or small boutique offices.
The U.S. banking industry is also converting some of its retail bank locations into high-tech branches without employees, Bialas said. Or they are parceling off excess real estate, ultimately whittling down the banking footprint in the country.
"It’s not about them pulling back, but they are optimizing their footprints," Bialas said. "They have downsized into a more efficient floorplate or moved elsewhere in retail spaces. No banking institution is immune."
Even though automated and mobile banking have changed the way customers use retail banks, Bialas said, banks can’t rely entirely on financial institutions operating as e-commerce businesses.
In the future, Bialas said he expects to continue seeing banks take a methodical approach to new branch development, and about 2 percent of total inventory — or roughly 1,700 locations — to close throughout the country.
"Everybody, everywhere is optimizing their branch footprints," he said. "In some places they are growing, but they are also closing branches that were dysfunctional to fit the business model better and optimize performance."
Largest Houston-Area Banks
Ranked by Local Deposits
Rank Bank Name Local Deposits 1 JPMorgan Chase Bank NA $104.72 billion 2 Wells Fargo Bank NA $25.92 billion 3 Bank of America NA $20.63 billion View This List