The Many Uses of Old Banks

While many banks may be looking to close locations over the next few years, there is some good news for owners of those assets: COVID-19 has shown value in having a drive-through.

“The good thing about banks is they have that drive through zoning,” says Noah Shaffer, senior director of asset management for Confidant Asset Management (CAM). “Once you figure out how to work around the bank vault and the installation of restaurant equipment and fixtures, the existence of a drive-through will help the permitting process for a retrofit to a restaurant.”

If banks don’t become restaurants, they can also work as medical or general office and retail space, such as cellular stores or funeral homes, according to Shaffer. Regardless of the use, they are usually attractive options for tenants.

“Somebody else will want to be in a decently well-profiled location,” Shaffer says. “They’re usually in a nice-looking building, with high quality building materials, in a retail corridor, but the new tenant is just not going to pay the same rent as the bank would. But we typically see some restaurants and then maybe general retail, such as a cellular store or something along those lines move into those spaces.”

While COVID-19 proved the value of drive-through for pharmacies, restaurants, banks, coffee shops and liquor stores, Shaffer says many tenants are not seeking drive-through space yet.

“We’ve had a lot of conversations with tenants who are beginning to think along those lines, but they’re just not making that call yet,” Shaffer says. “They aren’t actively reaching out and saying like, ‘Hey, we’ve figured out that this is what we’re going to do. Let’s sign the lease because we’re going to do a drive-through mattress pickup store now. I think every tenant who is contemplating a shift in real estate strategy still has seven or eight ideas on the chalkboard, but they haven’t figured out exactly what strategy to execute going forward, and there is going to be a lot of speculation.”

But, right now, if a retailer didn’t have plans for a drive-through before COVID-19, they’re not talking about it meaningfully now, according to Shaffer. “We just haven’t seen anybody sign those leases or have those conversations in a meaningful way yet,” he says.

But between ghost kitchens, Starbucks and other retailers, Shaffer expects a lot more interest in drive-throughs over the next few years.

Other restaurant chains are also rolling out more drive-throughs. “Panera was doing a pretty big roll-out plan, moving from inline stores to drive-throughs,” Shaffer says. “Those are different stories and are on the fast track. Maybe they were trying to do drive-throughs at 10% of their stores a year. Now it may be 25%.

Regardless of what tenant moves into retail space, many landlords who lease to banks will soon need new tenants. As these bank leases roll over, Shaffer sees some moving out of current locations.

“They’re just not going to pull the trigger on a renewal unless it makes sense,” Shaffer says.