GLOBAL - Retail banks are reluctant to offload branch assets despite a forecast 50% drop in consumer demand by the end of the decade, according to a report published this week by Jones Lang Lasalle.
Most banks have invested too much in their branch networks to consider radical disposal programmes, according to the report.
Instead, head of EMEA retail research and consulting James Brown said they would rework branches and focus on a retail model to avoid asset obsolescence as a result of a shift in the balance between branch and digital - especially mobile - banking.
"This is all about 'right space, right place'," he told IP Real Estate. "Some retail branches will become surplus to requirements as banks embrace multi-channel banking, [and] some branches that remain will have to be relocated to the right space in the right locations, or will need to be refit to meet changing customer requirements.
"In their current form, whether in terms of location or physical form, a large proportion of retail bank networks will have to change to become relevant.
"Physical branch networks play a very important and necessary role in retail banking, but change is inevitable."
While lease expiries will provide an opportunity for many high street banks to offload surplus or sub-optimal branches, those in prime locations may be able to negotiate an earlier exit.
The report said banks would increasingly compete for prime space with retail operators, with resulting upward rental pressure.
"Banks are becoming more like coffee shops," said the report, forecasting a move towards more formal joint ventures and even "the Bank of Starbucks".
In emerging markets, the dominance of local banks is unlikely to make a difference to the kind of real estate assets required - although banks in developing and frontier markets may be able to leapfrog to multichannel banking without first building up vast branch networks.
Despite forecast potential demand for 40,000 additional branches in India, elsewhere the report said logistical constraints in much of the developing world made having a branch in every town "unrealistic".
Moreover, "the problem expansionist banks are facing is the same as retrenching banks: it's about the fundamental branch model. Ideally, expanding banks want to be in prime locations next to retail consumer brands but just do not have the pulling power, the turnover or the image to impress developers and investors".
Logistics will become increasingly important in the new-look banking environment, with data centres most likely to be located in markets where not only stock but also power and security can be guaranteed.
"As requirements increase with increasing demand for technology-enabled banking and services, the biggest challenge will be in meeting demand," said Brown.
