For the past few years, banks in brand-building mode have been pushing rents in New York City (and other urban/suburban areas) to steep levels as they competed against one another in key neighborhoods. But brokers now say the shakeout from consolidation in the banking sector and the financial industry's current woes could spell branch closings throughout the city in the next few years.
The end of the banking industry's hectic expansion pace should open some prime retail real estate in New York City for other retailers too. According to The Real Deal, at the height of the bank expansion 18 months ago, a corner spot could yield landlords twice the normal asking rent.
Observers say the subprime mortgage crisis has led to more cautious expansion in the banking sector overall. Consolidation -- e.g., Capital One's acquisition of North Fork and Chase's purchase of Bank of New York -- is also likely to lead banks to close cannibalistic branches. Finally, Bill Melville, senior managing director of Lansco Corp, said many banks are facing the "law of diminishing returns," since many banks have fairly saturated the market.
According to The Real Deal, this branch pullback has already opened up opportunities for other retail formats to secure coveted corner spots the banks had been grabbing. For instance, the southern end of Soho has recently added a number of hot new fashion and home stores, including Madewell (J. Crew's spin-off), CB2 (Crate & Barrel's sub-brand) and Japanese lifestyle home chain Muji. International retailers such as Zara, Reiss and Uniqlo are also said to be on the hunt for high-profile locations.
In midtown, chains such as Staples and Kinko's catering to the office market could find more reasonably-priced spots, said Andrew Mandell of Ripco Real Estate.
In the next six to 12 months, "there will be a fairly significant change in the retail world," said Mr. Mandell.
Discussion Question: What do you think of the banking industry's use of retail as a core branding tool over the last several years? Was it a smart or excessive move? Secondly, how might the slowdown of bank branch openings reshape the retailing landscape in key urban areas?