Bank Branches Are Disappearing. Many Landlords Are Happy To See Them Go

The United States ended 2024 with 1,354 fewer retail bank branches than when the year began. The closures are a return to a longstanding trend of banks shrinking their footprints after a pause in 2023. 

Banks have long been a staple tenant for strip centers and freestanding retail pads near larger shopping hubs. With plentiful parking and dedicated drive-thrus, both types of retail real estate are coveted, making vacated banks a prime opportunity for tenants and landlords alike.

“The constraint on supply has propped up rents, in some cases higher than they should be,” said Terrison Quinn, managing principal for Southern California at SRS Real Estate Partners. “There’s very limited new supply. ... There's enough demand out there, and we’re often competing for these boxes.”

The number of retail bank branches in the country has been on a steady decline for more than a decade, with 13,588 fewer retail banks at the end of 2024 than there were in 2010, according to Federal Deposit Insurance Corp. data. At least 211 more branches have closed since the start of this year, according to notices filed with the Office of the Comptroller of the Currency.  

The pace of bank closures accelerated at the start of the decade, peaking in 2021. Closures slowed in 2022, and in 2023, a net 93 new banks were added, but financial institutions returned to shuttering storefronts last year. 

Retail bank operators say they are closing locations in response to changing consumer demands. With most basic banking functions available on customers’ phones, physical locations are repositioned to help guide customers through complicated financial transactions.

“Clients’ banking preferences and behaviors are changing, including a rapid migration toward digital and mobile banking platforms, and a desire for greater simplicity,” a U.S. Bank spokesperson said in a statement. “As we evolve along with our clients, we are reevaluating our physical footprint, and in some instances, consolidating branch locations in select markets.”  

The impact of a retail bank closure on a landlord is highly variable depending on the property’s location and quality, but from a macro perspective, tight retail vacancy rates have meant that the now-empty storefronts are in high demand and can frequently command higher rents than before. 

It takes an average of six to 12 months for a vacant bank to be sold or leased, said Vijay Jesrani, JLL managing director and U.S. financial services consulting lead. The average time frame for JLL’s bank clients is roughly seven months, he said. 

The parcels on the corners of shopping centers that banks typically occupy are prime real estate for a retailer, and their leases are more complicated than a standard storefront inside a shopping center. Deals frequently involve long-term ground leases, with the tenant typically bearing the brunt of construction costs. 

“We often have multiple offers. The tricky part is there’s a limited pool of tenants that can afford the ground lease,” Quinn said. “Everybody wants to be out on an outparcel in front of an anchor, especially a grocer or a Target or other power retailer, but the only tenants that have the financial ability, typically, to ground lease are national credit-type tenants.” 

The retail sector is broadly suffering from a lack of quality space, with limited new construction in recent years helping keep store vacancies at 4.1% at the end of 2024. Despite a wave of high-profile bankruptcies and closures in the last year — Party City, Joann, Big Lots, Rite Aid and more — vacancy rates remain low as landlords at quality properties quickly backfill space. 

When a retail bank closes the doors on its freestanding branch in the corner of a shopping center, landlords are left with two options. Roughly half the time, owners opt to reuse the building. Quinn said he has done deals to turn old banks into veterinary clinics and urgent care centers and has split them in half to create quick-service restaurant spaces.

The alternative is to demolish the property and partner with a tenant that signs a ground lease and bears the majority of the cost of building its new storefront. Who will pay for the removal of the heavy and cumbersome vault at a former retail bank is a frequent sticking point in negotiations, Quinn said. 

If the site is large enough, a gas station or car wash might move in. More often, it is a fast-food or chain restaurant that both fits the space and has the credit profile to secure the lease. 

Reusing the existing property can get tenants in place quickly to start generating rental revenue, but landlords frequently will make more money if they are able to wait for a corporate tenant that can afford to pay a premium for the location.

Retail banks cycling out of large store formats is part of an evolution of their purpose, Jesrani said. The snaking line to a teller and pens on chains have been replaced by a bakery and an employee armed with an iPad, ready to direct customers to staff that can assist with more complicated or nuanced transactions that don’t fit neatly into an app. 

“The changes to our financial center network reflect how our clients choose to bank with us,” a Bank of America spokesperson said in an email. “Most day-to-day banking can be done using our app, with clients coming to a financial center when they want to have a conversation with one of our financial specialists.”

A Wells Fargo spokesperson echoed that sentiment in a statement, saying the bank was both opening and closing locations in response to “the changing traffic patterns and retail landscape.”

Banks have some of the most stringent and sophisticated site selection criteria, Jesrani said. Foot or car traffic and visibility have always been the key variables, but Jesrani has also worked with clients that see colocation opportunities. 

He helped one bank find locations near Whole Foods because the client wanted to be near Amazon return centers. Another client targeted locations near Starbucks because it was hoping to attract a younger clientele, he said.  

“If somebody said, ‘I want to be there,’ there's four other banks there, all four corners are taken,” he said. “Getting into a market is not so hard. Getting the exact spot you want is challenging.”