With the growing popularity of online and mobile banking – a trend accelerated by the COVID-19 pandemic – it’s fair to wonder about the future of the physical bank branch.
But even with the rise of online banking, the branch remains a key feature of the industry. In fact, at least half a dozen new branches have opened in the Boulder Valley and northern Colorado in the past year.
So how do bank executives decide where to locate their branches?
“It’s really more of an art than a science,” said Shawn Osthoff, president of the Bank of Colorado.
For retail-oriented banks, customer convenience is paramount, he said – “good entry and exit access with good visibility”.
Site selection for consumer banks is “driven by demographics and traffic,” said Skye Commercial Real Estate Inc. management broker Geoffery Keys.
Another important consideration is the potential for growth.
“Is the market going to grow? Are there places where the traffic lanes will continue to be threaded? Said Osthoff.
He cited the Bank of Colorado branch in Johnstown Development 2534, which opened about a decade and a half ago – as an example of a good site selection process.
“We were one of the first buildings there,” said Osthoff. “We might even have been a bit ahead of our time,” opening before much of the existing development was completed.
“But it’s been a great place for us in terms of brand awareness, visibility and accessibility,” he said. “It’s kind of a billboard. “
For commercial banks, the site selection calculation is a little different.
“We don’t think about branch site selection like many national banks that are more retail oriented and need to think about driving traffic to their branches,” said InBank Chairman Ed Francis .
“With a business customer 95% of the time we go to see him, he doesn’t come here to see us,” he said. “… We think more about the entrances and exits for our bankers and their ability to reach their customers. “
Whether their customers are newlyweds opening a joint savings account or a restaurant chain seeking funding to open a new ramen shop, longevity is essential for the banking section of the site.
“You need a lot of infrastructure to set up a branch in terms of security, safes, safes. There is a big upfront cost to establishing a branch, ”Keys said. “… When we look for a branch, we usually look for a lease of at least 10 years. They will usually stay in their space much longer than that.
Due to the expense and the desire to stay put for an extended period of time, some banks are focusing their expansion efforts on real estate they can own rather than rent.
“When you build bank branches and nice offices, it gets quite expensive. So we try to think of places where we can own. If we can’t own them, then we think of places with long term rental options, ”Francis said. “Once you’ve established a location, it doesn’t make a lot of sense to move it every year. “
In general, Francis said he adheres to the “philosophy that we want to be in big markets with a lot of growth where you can gain market share or we want to be a dominant player in small markets”.
West Greeley is a ripe market for Bank of Colorado expansion.
“The town of Greeley continues to grow west, and we wanted to be in the middle of the growth path,” Osthoff said of the decision to place a branch on West 20th Street.
“For the most part, we’re looking to new and growing markets that haven’t been served by the banks, so we’re early to get there,” he said.
As bankers rush to defend the importance of the branch, they recognize that the industry has changed.
“The size of these branches has changed dramatically,” said Osthoff. “The days of a 10,000 square foot branch are over. Most of the sites we look at are over 3,000 to 4,000 square feet at most and sometimes less than that.
Francis said he “doesn’t think bank branches are going to go away. I think there will always be clients who will need to see bankers and interact personally. But the industry is changing, and FinTech companies are largely leading this way. We must therefore evolve and serve customers as they want to be served.