HOUSTON—Consumers are more mobile than ever, and the banking industry shows just how quickly innovations alter consumer behaviors. It took decades for ATMs to be accepted, but now mobile apps and fintech define the entire future of banking real estate.

While the recession forced banks to tighten operating costs and halt branch growth, mobile banking picked up momentum. As a result, banks are consolidating and optimizing locations. JLL's 2017 Banking Outlook reveals that the recession and consumer technology have led to a near-8% decline in US branch banks since 2009, according to the FDIC. At the same time, new branches are still being built to fulfill market needs, indicating a robust and evolving industry.

“Technology is creating waves in every industry and every sector of retail, including branch banks. For Houston, the implications are namely fewer branches, smaller branches and bank branches that are tailored to meet customer needs of specific areas, just like we're seeing nationally,” Geno Coradini, executive vice president of retail with JLL and Texas banking expert, tells GlobeSt.com. “All of this comes as the result of the technological evolution of banking, which has mobile apps and fintech streamlining the personal banking experience.”

The latest JLL research shows that in 2010, the number of bank branches in Houston, Woodlands/Sugar Land was 1,558. Last year, that number was reduced by 76 or 1,482 total branches, a percentage decrease of nearly 5%.

With a massive real estate shift underway, JLL's report lays out the trends for retail banks.

The number of branch locations will continue to shrink, and we won't miss them, says JLL. With banks adapting to consumer needs, there could be a 20% reduction in branch locations as leases expire during the next five years. While customer access to branches remains important, the necessity of a branch network is being balanced with advances in mobile platforms and fintech, and fewer locations could lead to $3.2 billion in annual cost savings.

Mobile apps and broader fintech applications will streamline personal and business banking. Mobile technology allowed early adopters to complete simple banking transactions without ever entering a branch or even using a computer. Now, customers expect to do more than transfer funds from their smartphones and innovations will further expand mobile capabilities.

Bank branch size will shrink, saving billions in real estate costs annually. By downsizing remaining branches by 2,000 square feet and reusing or subleasing surplus space if possible, banks can save more than $5 billion annually.

Not all branches will be created equal. As banks tailor branches to meet customer needs and regional demographics, full-scale operations and convenience locations for basic transactions will be peppered in real estate portfolios.

Automated branches are coming. Consumers today are more accepting of banking innovations than in years past. Moving forward, expect to see greater use of remote tellers assisting with basic transactions.

“The branch strategy of relying on sheer numbers to win market share is a thing of the past, and now banks need to focus on a customer-centric real estate approach,” said Coradini. “Mobile apps and fintech have transformed how we bank, but branch banks don't need to compete with these tech advances. Instead, they should leverage them to maximize real estate cost savings and the customer experience moving forward. The introduction of automated tellers is pivotal for banks to limit real estate costs, however it will take time for customers to fully embrace a technology that introduces a whole new customer service experience. Optimizing market coverage is neither quick nor easy, but the long-term cost savings from this shift can be significant as banks also eliminate and shrink existing locations.”

With a massive real estate shift underway, JLL's report lays out the trends for retail banks.

Instant Insights /

How Low Can Bank Branch Locations Go?

Related Stories

Recommended For You