Kris
February 7th, 2004, 05:04 AM
February 7, 2004
Bank Branches, Sprouting Like Weeds
By JANNY SCOTT
http://graphics7.nytimes.com/images/2004/02/07/nyregion/bank.large.jpg
In a common scene, a Chase branch sits next to - and atop - a Commerce Bank branch on Fifth Avenue at 14th Street.
One curious aspect of city living is the not-infrequent discovery that one's neighborhood has suddenly become occupied territory. One year, the invading forces are drugstores. The next year, they are nail salons or stores selling mobile phones. Before you even realize that you need 27 types of dental floss more than you need, say, bread, a half-dozen stores have materialized to help you out.
These days, the occupying army is banks.
Nearly 100 new bank branches opened in New York City in the two-year period ending last June, the latest period for which federal data exist. Many dozens more are on the way. Branches are sprouting almost weekly - replacing doughnut shops, housewares stores, clothing marts, even Starbucks. One 10-block stretch of Broadway on the Upper West Side of Manhattan has found itself suddenly home to nine banks.
"I tell landlords, the only people expanding are banks, drugstores and cellphone stores," said Robert K. Futterman, who heads a retail real estate leasing company, based in New York, that bears his name. "The old joke is: We represent many owners and everyone wants Prada, Gucci and Louis Vuitton - and everyone ends up with Duane Reade, Washington Mutual and AT&T Wireless."
In a building on the northwest corner of Fifth Avenue and 14th Street, a Chase bank branch sits directly on top of a Commerce branch. On Broadway at 96th Street, there is a Citibank on the northeast corner and a Washington Mutual on the southeast. Chase is on Broadway between 95th and 96th, Commerce at 94th, Fleet and North Fork at 91st, Washington Mutual at 90th, HSBC at 88th, Citibank at 86th.
A few blocks farther south, a couple of Fleet bank machines recently replaced an eyeglass store; an Independence Community Bank is taking the spot vacated by a health food market. There is a new Washington Mutual at 75th and Broadway, an Apple and a Commerce at 74th, a Chase at 73rd and a North Fork and a Citibank at 72nd.
Some of the new branches barely resemble those cavernous old-style banks where a line of bored-looking customers snakes its way toward a phalanx of bored-looking tellers behind glass. Some look more like the lobby of a hip hotel. A "concierge" greets new arrivals. Some do not even call themselves banks; they prefer "financial centers" or "stores," and they measure themselves against retailers like Home Depot.
Others are little more than high-rent foyers housing a couple of automated teller machines.
"You walk into some of these banks, there's no bank," said C. Bradley Mendelson, executive vice president of CBRE, a commercial real estate firm. "They're the unbank, for the most part. I'm not really understanding it, to be honest with you. I don't know exactly what all these banks do except for move depositors from one bank to another bank. And at some point, there's only so many depositors."
Thomas K. Brown, the chief executive of Bankstocks.com, a financial services research Web site, said, "It's the lemming mentality again. Bankers are known for following each other over the cliff." He added: "My prediction is that many of these offices that you're seeing opened up now will be closed in a couple of years. Because there won't be enough business to justify the expense of operating all these branches."
There was a time when bank branches appeared to be a dying breed, a casualty of banking industry consolidation and of the belief that automated teller machines, online banking and telephone call centers would reduce customers' reliance on their neighborhood branch. The number of branches and bank offices in Manhattan plunged from 607 to 459 between June 1994 and June 2001, according to federal data.
The other four boroughs lost dozens, too, in that period - a time of unprecedented affluence, with the city's population climbing to a record high. Jeffrey Hawkins, a senior vice president at J.P. Morgan Chase, said that in 10 years his bank closed several hundred branches in the Northeast and Texas, many because of mergers and acquisitions.
"Retail banking became an area of the banking business that most people didn't want," said Vernon W. Hill, chairman and chief executive of Commerce Bancorp. "As banks got larger, it was cheaper to fund themselves through wholesale rather than retail. There was a general feeling that it was too much trouble, you couldn't make enough money, it was cheaper to lend to Argentina than to the guy in Queens."
But bankers now say the industry overestimated the attractions of electronic banking and underestimated the profitability of retail banking. They say they have since learned that customers still want, as John Hall, a spokesman for the American Bankers Association, puts it, "high touch, instead of high tech" - or at least they want the choice. And some people, like Mr. Brown, say the most successful banks over the last decade were the ones that were good at opening, not closing, branches.
One of those was Commerce, which started with a single branch in New Jersey in 1973 and had none in New York City until shortly after Sept. 11, 2001, when it opened a branch in Midtown Manhattan and one on the Upper West Side. Two and a half years later, its city inventory is 26. In an interview, Mr. Hill said, "We want 100 in New York City. We'll get to 50 or 60 in a couple of years."
Washington Mutual, based in Seattle, also arrived in New York City in 2001, after acquiring Dime Savings Bank. It inherited 40 branches in the city and has opened 34 more since June 2002. John Benevento, a senior vice president, said of the New York metropolitan area, "We do have expectations of opening on average approximately 50 branches a year over the next five years. We will end up with 400 branches in this market."
Even J.P. Morgan Chase will be opening new branches, albeit at a slower clip. Mr. Hawkins, the Chase senior vice president, said Chase plans to open 100 new branches in the Northeast and Texas in the next four years.
Not every neighborhood is equally flush with banks. Banks tend to gravitate toward high-density and high-income areas, bankers and brokers said. The demographics of the Upper West Side shifted during the 1990's, and the neighborhood became more affluent. As one broker put it, "Ipso facto: More money, more banks."
If the proliferation of bank branches in some neighborhoods seems baffling, the competition has produced some obvious benefits. Commerce is selling itself in part as the bank that is open seven days a week, with extended weekday hours. Washington Mutual officials said their bank is "the only national bank that is A.T.M.-surcharge-free."
The real estate market has benefited, too. "There are like four of them who compete almost head to head for every major corner in New York - Midtown and Upper East and Upper West," Susan Kurland, executive director of Cushman & Wakefield, a real estate services firm, said of the banks. "They've almost created their own marketplace, in terms of rent. There have been many cases where banks have beaten out a national retailer on price per square foot."
Not everyone is happy. Gale A. Brewer, the city councilwoman who represents the Upper West Side, compares the impact of the bank branch boom on her neighborhood to that of chain stores. Landlords tend to favor them to the detriment of smaller mom-and-pop operations, she said.
Benjamin Fox, executive vice president at Newmark New Spectrum Retail, a commercial brokerage firm, said the proximity of one bank to the next is not necessarily without logic.
"Banks aside, this city is really 50 cities wrapped up in one," he said. "The pedestrian patterns, the mass transportation hubs are spread out all over the place, so you can literally have a location two blocks from yourself without experiencing any cannibalization. "
Copyright 2004 The New York Times Company
Bank Branches, Sprouting Like Weeds
By JANNY SCOTT
http://graphics7.nytimes.com/images/2004/02/07/nyregion/bank.large.jpg
In a common scene, a Chase branch sits next to - and atop - a Commerce Bank branch on Fifth Avenue at 14th Street.
One curious aspect of city living is the not-infrequent discovery that one's neighborhood has suddenly become occupied territory. One year, the invading forces are drugstores. The next year, they are nail salons or stores selling mobile phones. Before you even realize that you need 27 types of dental floss more than you need, say, bread, a half-dozen stores have materialized to help you out.
These days, the occupying army is banks.
Nearly 100 new bank branches opened in New York City in the two-year period ending last June, the latest period for which federal data exist. Many dozens more are on the way. Branches are sprouting almost weekly - replacing doughnut shops, housewares stores, clothing marts, even Starbucks. One 10-block stretch of Broadway on the Upper West Side of Manhattan has found itself suddenly home to nine banks.
"I tell landlords, the only people expanding are banks, drugstores and cellphone stores," said Robert K. Futterman, who heads a retail real estate leasing company, based in New York, that bears his name. "The old joke is: We represent many owners and everyone wants Prada, Gucci and Louis Vuitton - and everyone ends up with Duane Reade, Washington Mutual and AT&T Wireless."
In a building on the northwest corner of Fifth Avenue and 14th Street, a Chase bank branch sits directly on top of a Commerce branch. On Broadway at 96th Street, there is a Citibank on the northeast corner and a Washington Mutual on the southeast. Chase is on Broadway between 95th and 96th, Commerce at 94th, Fleet and North Fork at 91st, Washington Mutual at 90th, HSBC at 88th, Citibank at 86th.
A few blocks farther south, a couple of Fleet bank machines recently replaced an eyeglass store; an Independence Community Bank is taking the spot vacated by a health food market. There is a new Washington Mutual at 75th and Broadway, an Apple and a Commerce at 74th, a Chase at 73rd and a North Fork and a Citibank at 72nd.
Some of the new branches barely resemble those cavernous old-style banks where a line of bored-looking customers snakes its way toward a phalanx of bored-looking tellers behind glass. Some look more like the lobby of a hip hotel. A "concierge" greets new arrivals. Some do not even call themselves banks; they prefer "financial centers" or "stores," and they measure themselves against retailers like Home Depot.
Others are little more than high-rent foyers housing a couple of automated teller machines.
"You walk into some of these banks, there's no bank," said C. Bradley Mendelson, executive vice president of CBRE, a commercial real estate firm. "They're the unbank, for the most part. I'm not really understanding it, to be honest with you. I don't know exactly what all these banks do except for move depositors from one bank to another bank. And at some point, there's only so many depositors."
Thomas K. Brown, the chief executive of Bankstocks.com, a financial services research Web site, said, "It's the lemming mentality again. Bankers are known for following each other over the cliff." He added: "My prediction is that many of these offices that you're seeing opened up now will be closed in a couple of years. Because there won't be enough business to justify the expense of operating all these branches."
There was a time when bank branches appeared to be a dying breed, a casualty of banking industry consolidation and of the belief that automated teller machines, online banking and telephone call centers would reduce customers' reliance on their neighborhood branch. The number of branches and bank offices in Manhattan plunged from 607 to 459 between June 1994 and June 2001, according to federal data.
The other four boroughs lost dozens, too, in that period - a time of unprecedented affluence, with the city's population climbing to a record high. Jeffrey Hawkins, a senior vice president at J.P. Morgan Chase, said that in 10 years his bank closed several hundred branches in the Northeast and Texas, many because of mergers and acquisitions.
"Retail banking became an area of the banking business that most people didn't want," said Vernon W. Hill, chairman and chief executive of Commerce Bancorp. "As banks got larger, it was cheaper to fund themselves through wholesale rather than retail. There was a general feeling that it was too much trouble, you couldn't make enough money, it was cheaper to lend to Argentina than to the guy in Queens."
But bankers now say the industry overestimated the attractions of electronic banking and underestimated the profitability of retail banking. They say they have since learned that customers still want, as John Hall, a spokesman for the American Bankers Association, puts it, "high touch, instead of high tech" - or at least they want the choice. And some people, like Mr. Brown, say the most successful banks over the last decade were the ones that were good at opening, not closing, branches.
One of those was Commerce, which started with a single branch in New Jersey in 1973 and had none in New York City until shortly after Sept. 11, 2001, when it opened a branch in Midtown Manhattan and one on the Upper West Side. Two and a half years later, its city inventory is 26. In an interview, Mr. Hill said, "We want 100 in New York City. We'll get to 50 or 60 in a couple of years."
Washington Mutual, based in Seattle, also arrived in New York City in 2001, after acquiring Dime Savings Bank. It inherited 40 branches in the city and has opened 34 more since June 2002. John Benevento, a senior vice president, said of the New York metropolitan area, "We do have expectations of opening on average approximately 50 branches a year over the next five years. We will end up with 400 branches in this market."
Even J.P. Morgan Chase will be opening new branches, albeit at a slower clip. Mr. Hawkins, the Chase senior vice president, said Chase plans to open 100 new branches in the Northeast and Texas in the next four years.
Not every neighborhood is equally flush with banks. Banks tend to gravitate toward high-density and high-income areas, bankers and brokers said. The demographics of the Upper West Side shifted during the 1990's, and the neighborhood became more affluent. As one broker put it, "Ipso facto: More money, more banks."
If the proliferation of bank branches in some neighborhoods seems baffling, the competition has produced some obvious benefits. Commerce is selling itself in part as the bank that is open seven days a week, with extended weekday hours. Washington Mutual officials said their bank is "the only national bank that is A.T.M.-surcharge-free."
The real estate market has benefited, too. "There are like four of them who compete almost head to head for every major corner in New York - Midtown and Upper East and Upper West," Susan Kurland, executive director of Cushman & Wakefield, a real estate services firm, said of the banks. "They've almost created their own marketplace, in terms of rent. There have been many cases where banks have beaten out a national retailer on price per square foot."
Not everyone is happy. Gale A. Brewer, the city councilwoman who represents the Upper West Side, compares the impact of the bank branch boom on her neighborhood to that of chain stores. Landlords tend to favor them to the detriment of smaller mom-and-pop operations, she said.
Benjamin Fox, executive vice president at Newmark New Spectrum Retail, a commercial brokerage firm, said the proximity of one bank to the next is not necessarily without logic.
"Banks aside, this city is really 50 cities wrapped up in one," he said. "The pedestrian patterns, the mass transportation hubs are spread out all over the place, so you can literally have a location two blocks from yourself without experiencing any cannibalization. "
Copyright 2004 The New York Times Company