A lot of observers see banksclosing more branches in the future. The challenge is picking wherethose branches will be.

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There are a lot of guesses, butfew known strategies.

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"There is no one size fits all asto what bank branch is going to close," says Noah Shaffer, seniordirector of asset management for Confidant Asset Management."People say, 'If it doesn't have a $100 million in deposits,they're going to close it.' That's not true, and sometimes theydon't close branches with far less than $100 million in deposits.And sometimes they've closed branches with more than $100 millionin deposits."

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In this environment, it's goingto be challenging for landlords as banks consolidate branches."There's really no rhyme or reason to it," Shaffer says. "They'resaving money because they're closing three locations and keepingthe highest-profile one open. But those three are never going toreopen."

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An argument for banks to closebranches is cost. "Banks pay the second-highest rent per squarefoot—right behind pharmacies," Shaffer says. "Pharmacies have hadtheir struggles and challenges with real estate over the last fiveyears."

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In the past, banks were adestination for people because they knew where the bank waslocated. But now Shaffer says people value bank branches forconvenience. As this happens, banks see their locations as placesthat can provide visibility for their brand.

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"If you can put a bank on acorner with a 100,000 cars passing by in a day, you're getting yourbank branch out in front of a 100,000-plus people, which is aphenomenal form of marketing," Shaffer says.

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Even if that bank is paying$150,000 in rent, the exposure can be worth it. "You're basicallypaying marketing dollars," Shaffer says. "People are seeing yourbank branch in their community as a symbol of communityinvolvement. The customer experience must be streamlined andflawless once a customer enters the bank. Otherwise, they willrefuse to come back, or change banks. There will be consolidationin this sector."

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There are only some of thesehigh-profile locations to go around. So if a landlord owns one ofthose properties, they may be able to increase rent.

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"Now all of the banks are doingthe same thing and competing for that high-profile space," Shaffersays.

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On the other hand, the landlordthat loses that bank branch could be facing problems. "If you'relosing your bank tenant, you're losing a lot across the board,"Shaffer says. "Banks have the highest credit quality, even more sothan pharmacies. So you're losing high rent per square foot andhigh rent in total dollars. Then you're losing their credit rating.And so how do you replace that?"

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.