Manhattanites May Soon Have Less To Bank On
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The era in which Manhattanites could find two, three, sometimes even four retail banking outlets on the same city block could be ending, according to a number of retail brokers who are readying themselves for a shedding of banking outlets caused by the crisis in the financial sector. Hundreds of thousands of square feet of available commercial space could be hitting the market once the dust settles on Wall Street.
“We are going to have some excess bank space, and we have known this for a few months now,” a retail real estate broker at Prudential Douglas Elliman, Faith Hope Consolo, said. “I think the next quarter will be the flushout and then we will see where we are going.”
Driven by flush times and demand for variable rate home mortgages, there has been a steady growth in the number of banking branches in Manhattan over the past few years. There are now about 660 bank branches, up from 466 in 1998, according to the New York State Banking Department. To put that in perspective, there are about as many banking branches in Manhattan today as there are Starbucks and Dunkin’ Donuts outlets combined.
“The banks expanded too quickly,” the executive vice president at Newmark Knight Frank, Jeffrey Roseman, said, adding that his firm has been eyeing the abundant bank space for more than a year. “There is going to be a consolidation with three, maybe four, major banks standing and they will have a lot of sublease space on their hands.”
The signs of oversaturation are starting to show. A spokesman for Washington Mutual said the company was holding off on opening any new branches. The Emigrant Bank branch at 445 Park Ave. is closing December 12 and will be consolidated with the 62 Lexington Ave. office. Chase, as part of its acquisition of the Bank of New York in 2006, has consolidated a number of sites around Manhattan, although a spokesman said the company will continue to open new branches in the coming months.
To some, the prospect of retail bank closures bodes ill for New York’s already shaky commercial real estate market. With vacancies on the rise, some analysts say the price of commercial real estate is likely to plunge over the next 12 months, and there is no guarantee that space hitting the market will be filled.
“If you are not capsizing but rather downsizing, then you have a healthy environment where others can take a shot at it. My concern is if it is because of failure, then we might have empty corners without a lot of takers out there chasing the space,” a senior vice president at CB Richard Ellis, David LaPierre, said.
Others say the prospect of banks settling for a more modest presence in Manhattan is long overdue and could drive down prices, allowing for a more diverse set of merchants to set up shop.
“The banks always take the front corner store, and it just destroys the streetscape,” City Council Member Gale Brewer said. Last year, Ms. Brewer issued a report detailing how her Upper West Side district had been inundated with 60 bank branches over several years. “To have less would make the neighbors happy. You don’t want to see it happen because of a recession, and nobody wants anyone to lose their job. But fewer bank storefronts would be better,” she said.
While J.P. Morgan Chase has 121 branches, the most in the city, it is the branches of Washington Mutual that appear to be the most vulnerable.
Washington Mutual, with 46 branches in Manhattan, is in danger of having its operations splintered if it doesn’t find a buyer. Washington Mutual is in talks with a number of banks, including Citigroup, J.P. Morgan Chase, Wells Fargo, HSBC, Banco Santander, and Wachovia, according to published reports. Yesterday, Standard & Poor’s Ratings Services downgraded Washington Mutual creditworthiness into junk territory.
According to a retail broker with Ripco Real Estate, Andrew Mandell, the amount of available space that ultimately hits the market will depend upon which acquisitions — if any — occur.
“When you look at Citibank’s expansion over the last seven years, they have been less aggressive than Chase or Bank of America, so they could be able to absorb Washington Mutual branches. If Chase ends up acquiring Washington Mutual, it may be a little different. There could be some overlap and some space coming on the market,” Mr. Mandell said.
Other variables include the length and terms of the individual leases and whether landlords would be willing to allow for subleases or for the banks to opt out of their existing leases altogether.
Which retail industry could emerge in these spaces?
Ms. Consolo is predicting that food retailers or restaurants could benefit from these vacancies, Mr. Roseman says drug stores or coffee bars are well positioned to do so, and Mr. LaPierre says regional dry goods chains, such as apparel lines or fashion groups whose expansion has otherwise been slowed, could take advantage.
Others are predicting something entirely new.
“You will see a new kind of retail venture taking over the space, but it is difficult to predict what that will be — but it won’t be clothing,” a professor of urban policy and planning at New York University, Mitchell Moss, said. “It will have to be something that addresses a necessity.”