NYC’s Empty Storefronts Set to Increase as Bank Branches Shrink

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The streets of the Big Apple were once filled with mom and pop stores, one-of-a-kind retailers, and family owned restaurants. Things changed and currently, the streets of Manhattan are predominately filled with bank branches, and giant drug store chains, filling up each corner. Photo Credit: Getty Images

By: Hellen Zaboulani

The streets of the Big Apple were once filled with mom and pop stores, one-of-a-kind retailers, and family owned restaurants. Things changed and currently, the streets of Manhattan are predominately filled with bank branches, and giant drug store chains, filling up each corner. The setup has long made NYC vulnerable to those big banks and drug chains.

Now, with the increased popularity of mobile banking, the banks’ need for a giant branch on every corner and an impressive presence has diminished. As a result, NYC may soon have fewer bank branches and smaller banks, as the rest of the country already has. “The number of transactions being done over the counter at the branch has been falling,” said Alan McIntyre, senior managing director of global banking at Accenture. The banks don’t need as many tellers thanks to online banking, and furthermore bank branches are overlapping. In short, Wall Street’s presence on NY’s main streets will soon be dwindling, as per a recent article by Crain’s NY.

“There’s a bank on every single corner, and there’s definitely a backlash on that,” city historian Kevin Draper said. “So many people do banking online and over their phones. Frankly, New Yorkers will be happy to see some of these places going down. But the question is, Are these places going to just be vacant?”

Many of the big banks haphazardly signed lease agreements from 2002 through 2007, when they felt the sky was the limit. But, a lot of those branch leases will be expiring soon, and they will not necessarily be renewed. Many of NYC’s landlords are feeling queasy about how susceptible they are to vacancies. According to real estate brokers, property owners prized the easy and dependable rental payments paid by the world’s largest financial institutions. They are not looking forward to making deals and enticing struggling retailers to sign on. Of course, vacancy is even worse, cutting out a property’s profitability.

Already, across the United States, over half of the counties have lost bank branches from 2012 to 2017, with rural areas the bearing the grunt, as per the Federal Reserve. In Manhattan, over the last two years the number of bank branches has fallen 2.5 percent. Over the last five years, the branches are down 5 percent. It isn’t shocking when considering that the number of branches almost doubled between 2002 and 2009, as per data from the Federal Deposit Insurance Corp.

Already the modest decline in bank branches has triggered a drop in the prices of commercial properties. Average asking retail rents fell 8.1 percent in the third quarter compared to the year before, as per brokerage Jones Lang LaSalle. Crain’s reports, that already some Manhattan landlords are slashing rents or offering perks to keep banks in place, wary of the alternative of vacancies. “It’s almost impossible to replace the credit quality and rent strength of a national-bank tenant,” said Noah Shaffer, a senior director at Confidant Asset Management.

Still, some experts are offering an optimistic view, maintaining that banks may be inclined to keep the storefronts as long as Wall Street rallies. “The role that these branches are playing partly is [as] a billboard,” said McIntyre of Accenture, which consulted Chase on the design of its flagship branch at 390 Madison Avenue. “In terms of the impact it has visually, it’s more like looking at an Apple store or the Nike store on Fifth Avenue.”

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