Developer’s POV on Branch Space

By Deb Stewart

Associated Bank (assets: $26.6 billion), Green Bay, Wis., has a lot of branches with too much space. It is in the same situation as most other banks. The difference is the bank’s unique perspective on its real estate.

“You need someone working in the bank who knows how to buy and develop real estate,” says Darren Dewing, senior vice president, director of retail distribution. “Real estate expertise will help you when you are looking to develop new branch sites and will help you even more when you are trying to [lease out]your existing spaces.”

Associated has approached both challenges from this perspective. “Our approach to both developing new sites and reducing branch space is really the same,” Dewing explains.

He gives two examples: When Associated looks at developing a new site, it looks for the best piece of real estate it can buy in a market. If the best real estate is a 6,000-square-foot building, the bank will buy it.

“In Racine, Wis., we found a 6,000-square-foot gyro shop with a great location and great (transferable) signage rights. We took that building, divided the space, and put a tenant in the other half. In this case we found the tenant and developed the property ourselves.

“In another situation, we found ourselves with a 20,000-square-foot branch on five acres of land. It had previously been the headquarters of a bank we acquired. We have many bank customers who are developers. And in this case, we turned the project over to one of them. That developer built a new branch for us, along with 200 upscale apartment units and a Whole Foods supermarket.

“We want to own our real estate whenever we can. So we retained the portion of the land where our branch is located.”

When it comes to eliminating existing properties, Associated will sometimes do development internally and sometimes rely on a developer. “You need to understand the market you’re in from a developers’ perspective. Do you have great visibility and traffic count?

“A retail tenant may be the right choice. One example of this for us is a shared space with a Papa John’s pizza shop. More commonly, we have shared our space with dentists, medical practices, attorney offices and insurance brokers. Your tenant needs to be complementary to you and to the community your branch is in,” Dewing continues.

When you start looking at your network and determine where your excess square footage is, Dewing suggests that you make your first call to a good real estate broker. They can help you determine which sites have the right characteristics for development from a leasing perspective, what your likely tenant categories are, and what your potential revenue will be.

The next call should be to an architect who understands you and the business of banking. The architect will help you figure out how much of the building can be conveyed to others and whether the building can be modified at an appropriate cost for the potential revenue stream.

“It’s tempting to want to do it all yourself to avoid paying fees. But it’s important to find people who are good at this to help you. You owe it to your shareholders to find the right development partners,” says Dewing.

“There are fewer barriers than you think to [share space]. With cash recyclers and available security tools, physical security can be addressed. Some tenant entrances will be separate, but some will be shared based on tenant requirements. The solutions aren’t as daunting as they first appear.”

Dewing also notes that this may be a scalable solution for some banks. “If you have been building branch models with common footprints for a while, you may have the opportunity to standardize your approach to [sharing]those spaces. In the same manner that you designed the original branch, you can redesign it to become your standard [shared-space] branch. Branches are still important. They are where you acquire new customers and deepen existing relationships.

“We are just challenged with shifting the physical emphasis of these sites from transactions to sales and service. It can be done.”


Deb Stewart of Charlotte, N.C., is an independent consultant working for the financial services industry. Email: [email protected]

IDENTIFICATION OF TOP PHOTO: In today’s market, banks need to act like real estate developers when dealing with their branch network, according to Associated Bank, Green Bay, Wis. Shown is property developed by the bank. On one end of the structure, there is an Associated Bank branch; on the other end, a pizza parlor.”