MAGNOLIA, Tex. — David White was scouting this fast-growing community near Houston in 2016 in search of a site for his planned hamburger-chili parlor. The most promising candidate was a vacated suburban bank adjacent to a small shopping center.
Mr. White, a restaurant entrepreneur, had his doubts about turning a bank into a restaurant. But he hauled off the safe with a forklift, threw the tellers’ counters into an industrial-size trash bin and donated the bulletproof drive-through windows to the local police department.
Today, Ron’s Hamburgers and Chili is flourishing in its Magnolia location. Part of a chain based in Tulsa, Okla., the restaurant serves jumbo burgers and Frito pies in a bright red dining room that bears no hint of its previous life as a financial institution. The former drive-through is now a patio with lights, ceiling fans, speakers and a pair of 50-inch TVs.
Mr. White’s conversion of a former bank site is hardly an oddity. Banks have steadily pared branches over the past several years because of industry consolidation, efforts to curb operating costs and, most significantly, the growth of mobile and online banking.
Former bank branches have been reincarnated as pizza parlors, fast-food outlets, health care sites, massage chains, credit unions, educational institutions, churches and mobile phone stores. Some serve as locations for Starbucks, CityMD Urgent Care, CVS and other chains.
The number of bank branches in the United States has fallen to about 89,860 in 2017 from a peak of nearly 100,000 in June 2009, according to the Federal Deposit Insurance Corporation, which insures deposits and monitors the banking system. Last year, the number of branches dropped by nearly 2,000, a 2.2 percent decline from 2016.
The closings reflect the industry’s shift away from the “branch on every corner” concept and toward a strategy to provide “anytime, anywhere access” through the internet and mobile apps, according to an assessment by JLL, a global commercial real estate firm. JLL researchers predict that bank branches could face a further 20 percent reduction in the next five years.
This trend in banking is opening up real estate opportunities, however, as investors convert former financial institutions into an array of other uses.
Nearly 1,650 bank branches or former branches were up for sale across the country in mid-July, according to the CoStar Group, a real estate data and analytics firm. The average asking price was about $350 a square foot, which would be just under $2 million for an average-size bank of about 5,600 square feet, said Justin Bakst, CoStar’s director of capital markets.
“We’re certainly seeing more and more branches come available and hit the market,” says Dean Rosenzweig, a senior vice president for CBRE real estate services who oversees parts of New York City, Long Island and Westchester County. His team is involved in lease negotiations involving two former bank branches in Westchester County and has completed more than 15 similar transactions since 2007.
Attributes that were attractive to banks in the first place are now selling points for the converted property. Many occupy corner locations on busy streets with heavy retail traffic. The buildings are often free-standing and well maintained, with sturdy brick construction. Depending on municipal zoning restrictions, canopied drive-throughs can be converted to other uses, such as fast-food pickup, side entrances or patios.
Former banks can also offer the allure of architecture that reflects wealth and confidence. With its grand dome and mosaic marble floor, the Williamsburgh Savings Bank headquarters in Brooklyn was turned into an event space after HSBC sold the building in 2010. Part of an Apple Bank in Manhattan was converted to condos in 2006, and CVS moved into at least two banks in New York with high ceilings and marble columns.
Investors say they can often get good deals on former banks and find that converting an existing structure can be more efficient than building from the ground up. Conversion costs can vary widely, depending on the scope of the project, ranging from a few thousand dollars for a simple renovation to more than a million for a full-scale interior overhaul.
The transformation typically requires a wholesale makeover to rebrand a former bank inside and out. Perhaps the most daunting challenge is removing the bank vault — or whether to remove it at all.
Removal can be costly. Paul Ousey, the fourth-generation owner of Oz Trucking & Rigging Corporation, in Farmingdale, N.Y., said his company charges $35,000 to remove a standard composite vault measuring 8 feet by 14 feet and weighing 35 tons.
Some businesses, such as bars and restaurants, have elected to retain vaults and safe deposit boxes as part of the décor. In the small tourist community of Lake Tomahawk, Wis., Tina Rydzik saw a marketing opportunity after she found it impossible to remove the vault from a former bank she took over and converted into a pizza house.
She christened the enterprise Pizza Vault, and named nearly all the entrees after famous bank robbers. The vault, including its safe deposit boxes, stayed in place as part of the kitchen, and Ms. Rydzik put part of it to use as a freezer and storage unit. It’s also popular with customers who often go back to the kitchen and take a look.
“If they want to see it, we’ll show anybody,” said Ms. Rydzik, who believes the vault and the accompanying bank robber theme have helped attract business. “It’s just different. It’s something unique. It’s just kind of an extra added little bonus.”
For Amit Parkash, a real estate developer and investor in Atlanta, acquiring former bank sites has become a professional trademark. Over the past 10 months, he has acquired six sites and routinely types in “former banks” whenever he conducts an online search for real estate.
Mr. Parkash, who owned a carwash business, found his first vacated bank on a corner while driving around in search of a potential site for another carwash. His original intention, he said, was to scrap the bank. Instead, he decided to repurpose the building and take advantage of the prime location.
“It was a very attractive building,” he recalled. “I didn’t have the heart to tear it down and build a carwash.”
Subsequently, Mr. Parkash said, he sold his carwash business and purchased other sites from banks for roughly the cost of the land. Working through a leasing agent, he negotiated transactions with tenants who were either in the construction phase or finalizing leases for the former bank sites.
Even though many branch buildings are being redesigned and modified to address changes in consumer habits, they remain an integral part of the banking system, officials say. Total deposits have continued to increase nationwide, reaching $11.9 trillion in 2017.
“People still do want to visit branches for a variety of reasons,” said Nessa Feddis, senior vice president and deputy chief counsel for consumer protection and payments with the American Bankers Association. “People still want the personal touch.”
Still, investors like Mr. White, the Texas entrepreneur, await more opportunities.
“After I found this bank, that’s kind of what I look for,” Mr. White said. “I’ve kind of taken that as my footprint.”
