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Thread: Retail space banks are opening branches

  1. #1

    Default Retail space banks are opening branches

    NEW YORK TIMES February 17, 2002
    Manhattan: Retail Space Banks From Outside the City Are Opening Branches
    By JOHN HOLUSHA

    LED by a group of feisty banks, the retail sector of the real estate market in Manhattan is beginning to stir once again, after a period of near-paralysis after Sept. 11, brokers specializing in this sector of the market report. The bankruptcy of several store chains and cutbacks by others are also returning retail space to the market and providing opportunities for companies seeking to enter or expand in New York.
    One of the newcomer banks is Commerce Bancorp, which is headquartered in Cherry Hill, N.J. The sign in the window of a branch it is preparing to open at Third Avenue and 43rd Street lists its operating hours: weekdays 8 a.m. to 8 p.m., Saturdays 8 a.m. to 6 p.m., Sundays 11 a.m. to 4 p.m.
    In a city where most bank branches close at 3 p.m. and weekend service is limited to automated teller machines, this is clearly a different marketing approach. In fact, it is the reversal of a trend in which major New York banking companies merged and closed branches.
    "This was a Manny Hanny branch," said Faith H. Consolo, vice chairman of Garrick- Aug Associates, a retail-oriented brokerage company, of the site at Third and 43rd. She was referring to the former Manufacturers Hanover bank, which was merged with Chemical Bank in 1991 and was subsequently folded into Chase bank.
    She said a new Washington Mutual branch that is being built at Seventh Avenue and 37th Street once housed a Bankers Trust office. In fact, she said, many spaces that once were banks and then became retail stores are now coming full circle as bank branches again.
    "Ten years ago the banks went out and the resulting ground floor spaces became Gaps, Country Roads, Lechters, Cosmetics Plus, etc," she said. "Now Gap is downsizing, Ann Taylor is consolidating, Country Road is going and Lechters and Cosmetics Plus are gone. And the banks are coming back in."
    Because of the mergers, the New York area was left with one of the lowest ratios of bank branches to its population in the country. According to one study, by this measure New York was 21st on a list of the nation's 25 largest metropolitan areas.
    As a result, outsiders like Commerce, FleetBoston, Washington Mutual and North Fork have been snapping up promising street corners to provide services to neighborhoods in which New York-based banks have cut back their presence.
    The Seattle-based Washington Mutual acquired the Dime Saving Bank and is opening additional branches under its own name. North Fork Bank of Melville, N.Y., acquired the Commercial Bank of New York in 2001 to extend its reach in the city, and FleetBoston has been expanding in the city since 1996.
    The 3,500-square-foot former Bankers Trust space at 498 Seventh Avenue will be the New York headquarters for Washington Mutual, which has grown over the last dozen years into the nation's seventh largest bank, with assets of $225 billion.

    Although the location is in the middle of what was once best known as the garment district, many nonclothing tenants have moved into the area in recent years, changing its character, said Joseph Aquino, a managing director of Garrick-Aug.
    The office tenants in the building include Bates Worldwide Advertising, the Interpublic Group, Oppenheimer Funds and Data Broadcasting, Mr. Aquino said.
    Washington Mutual is also planning a branch at 2139 Broadway, at the northwest corner of the intersection with 75th Street. This is another example of the bank-to- store-to-bank cycle. Although it was most recently home of a Lechters housewares store, in the past it was the site of a Jamaica Savings Bank branch, Mr. Aquino said.
    REAL estate executives say the banks are sensing an opportunity in the densely populated city that is similar to Manhattan's attraction to other types of retailers in the past. "For a while it was big- box stores," said Andrew S. Goldberg, a senior managing director of Insignia/ESG, a brokerage and services company. "Now it is banks. Every good property that comes onto the market has a bank bidding on it."
    "Over the last six to nine months, there has been an influx of out-of-state banks who are filling a void left by consolidation of the big guys," said Benjamin Fox, an executive vice president of Newmark New Spectrum Retail, a subsidiary of Newmark & Company Real Estate, a brokerage and management company. The new entrants are more focused on attracting the accounts of individuals than some more established banks, he said, and offer interaction with real people rather than force customers to deal with machines.
    The new banks, he said, act more like retailers than bankers. Indeed, the chairman of Commerce Bancorp, Vernon W. Hill II, is part owner of a chain of Burger King fast-food restaurants.
    "When they open a branch, they put on quite a show," Mr. Goldberg observed. "They have gifts, clowns, shoeshines and massages. Nearby retailers think that is great and they like the operating hours as well."
    "Commerce is the fast food of banking," said David LaPierre, a director of Insignia/ESG, who has been active in leasing space to the new branches. "They are establishing a new type of brand."
    Real estate executives noted that the new banks have an incentive to develop their network of branches as rapidly as possible, because their names are not as well known as Chase and Citibank, the dominant players in the New York market. When they advertise their presence, the expenditure is likely to be wasted unless there is a branch near the customer receiving the ad. Mr. Hill has said he plans to open 30 branches in Manhattan.
    "Banks and telephone stores, that's where the action is today," said Alan Victor, executive vice president of the Lansco Corporation, a brokerage specializing in retail and office spaces. "The telephone stores are not big users of space, ranging from 1,000 square feet to 2,000 square feet. But some of the bank spaces are bigger. The Commerce bank space at 64th and Third is 6,000 square feet."
    MR. VICTOR said that while banks and telephone stores have been signing leases, other companies have been making inquiries about finding space in Manhattan after holding back in the period after Sept. 11.
    "There are a couple of California-based companies that are looking at this market seriously," he said. "It's not that we have to convince them to come to New York that's already part of their business plan. They think the time is ripe to make a move here."
    With the exception of the banks and cellphone stores, interest in opening new retail stores in Manhattan dropped abruptly after Sept. 11, as store operators wondered if there would be more terror attacks and attempted to assess the mood of shoppers, Mr. Fox said. "After 9/11 the national chains took a wait-and-see attitude," he said.
    Now, he said, the national chains "are coming out of hibernation."
    One result of the long period of inactivity, he said, is that landlords have become more realistic about the rents they can get from store spaces. Rents in most locations have not fallen much, but they have not increased either. Typical rents for a corner location in Midtown Manhattan, he said, range from $90 to $135 a square foot annually.
    "Things are awakening in the city again," said Susan Kurland, a senior director of Cushman & Wakefield, the brokerage and services company. "We are working with international retailers who are getting serious about identifying locations for stores."

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    NY Times
    September 14, 2005

    Multiplying in Manhattan: Banks

    By C. J. HUGHES
    Seemingly as numerous as Starbucks coffee shops - and sometimes resembling them, too - new bank branches are popping up across the city on corners, in the middle of blocks and even second-story spaces.

    Newcomers like Wachovia, Bank of America, Commerce Bank and Washington Mutual have taken over many retail spaces that once housed branches of their competitors and have also moved into former hardware stores, boutiques and restaurants.

    Landlords seem more than happy to accommodate them because banks are often willing to pay higher rents than retailers might pay for the same space.

    A bank might pay rent of up to $300 a square foot for space in much of Manhattan, especially in prime high- traffic areas like Union Square and along Broadway in SoHo, compared with $200 to $250 a square foot paid by retail stores in the same areas, according to landlords, property managers, bank executives, brokers and urban planners.

    This willingness to pay top rents "is the strong and compelling reason landlords want banks as tenants," said Gene P. Spiegelman, an executive director at Cushman & Wakefield, who recently negotiated four leases for Wachovia, which already has 13 branches in Manhattan, all opened since 2002.

    But, he added, landlords were also eager to find tenants with the wherewithal to thrive over the long haul. And so, landlords take note that Bank of America, say, has a credit rating of Aa1 from Moody's Investors Service while the Gap, the clothing retailer, has a lower rating of Baaa3, according to recent quarterly earnings reports. "It's all about maintaining a return on your investment," Mr. Spiegelman said.

    To make sure that these ideal tenants stick around as long as possible, landlords are locking them into unusually long leases of 15 or 20 years rather than more typical 10-year leases for retailers, said landlords and bank executives. Banks might be a bit squeamish about committing themselves to 20-year leases, reducing their ability to move if they choose, but landlords are seizing the opportunity to get banks to pay top dollar while they can.

    "Having seen a number of trends come and go, landlords are banking - pardon the expression - on these banks not being here in 10 years," said David La Pierre, a senior vice president and commercial real estate broker for CB Richard Ellis, who analyzes the retailing market. "The attempt is to maximize the opportunity that's there today."

    Even if the banking industry consolidates again as it did in the late 1980's, when many branches closed in New York City, landlords are not terribly worried. A banking company that takes over another will be obligated to complete the full terms of existing leases, they said.

    There can also be aesthetic advantages in leasing to a bank. Before last month, the street-level retail spaces at 317 Madison Avenue at East 42nd Street, a 23-story office tower built in the 1920's, included a drab currency exchange and a cigar store. Now combined, the 10,000-square-foot space holds a spacious Commerce Bank that has towering marble columns and gleaming black granite counters.

    "We're the dream tenant because we remodel the building," said Vernon W. Hill, the founder and chairman of Commerce Bank, which has, since 2001, also carved banks out of athletic shoe and women's clothing stores.

    Mr. Hill's landlord, the SL Green Realty Corporation, did not mind the makeover, which was paid for by Commerce Bank. "Commerce Bank gave us an opportunity to change the flavor of the building," said Steven M. Durels, an executive vice president and director of leasing for SL Green.

    Generally speaking, that flavor is vanilla, brokers and landlords said, creating a clean, corporate look. Yet occasionally, landlords encourage banks to cultivate an image that is much more distinctive, as at the year-old Bank of America at 1515 Broadway at West 45th Street, where the quotations on three blue stock tickers stream from floor to ceiling, giving the columns the appearance of barber poles.

    The design, along with the Steinway baby grand piano that sits in the corner, is not only a nod to Times Square's theater-fueled glitziness, Mr. Durels said, but also a conscious effort to brand the building as the headquarters of MTV, which is upstairs.

    Many upper-floor tenants like having a full-service bank under the same roof, as Rudin Management discovered long ago, according to Thomas M. Keating, the company's senior vice president and director of commercial leasing. "It's exactly the kind of amenity we want our tenants to have access to," said Mr. Keating, even if the bank might be paying a below-market rent. That is the case at 345 Park Avenue at East 51st Street, where Bank of America pays only $200 a square foot annually for a 10,000-square-foot space.

    If banking convenience really affects tenant satisfaction, the people who live in the Coronado building at 2040 Broadway at West 70th Street will be delighted next summer when a 3,000-square-foot Wachovia branch takes over a ground-floor nail salon.

    Jeffrey Katz, president and chief executive of Sherwood Equities, which owns the building, says banks project the right mix of cleanliness and style tenants like.

    "We consider the whole demeanor of the store: what the product is, how they keep the store looking and how their other stores look," Mr. Katz said. "But nobody objects to living above a bank." Mr. Katz is also trying to lure a bank into a combined first- and second-floor space in the residential condo building that he is constructing at 1600 Broadway at West 48th Street in Times Square.

    If the future means a new bank, or three, on every block, it could spell the displacement of other long-established businesses. That happened at 157 and 159 Eighth Avenue in Chelsea, which used to house a popular restaurant, Eighteenth and Eighth, and a hardware store. Now, the site is being demolished to make way for a Valley National Bank, which has nine branches in Manhattan.

    Still, most agree that banks, with their stylish, inviting exteriors, are preferable to many types of retail chains.

    "It's too early to make a judgment about their impact," said Mitchell L. Moss, a professor of urban planning at the Robert F. Wagner Graduate School of Public Service at New York University. "But I don't think we've seen banks reach the level of penetration that drugstores have."

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