Bank branch closures – how can property investors benefit?

High-street banking has changed drastically over the past decade. According to the consumer group, Which? more than a third of the UK’s bank branches have closed within the past five years. The rapid decline in high-street branches can be attributed largely to the rise of online banking and with the increasing popularity of online only banks such as Monzo, traditional branch banking appears, on the face of it, to be dying out.

The closure of bank branches has drastically altered the makeup of UK high streets. Bank branches play an important role in communities, particularly in areas where internet banking is not widely used, and their closure leaves vacant commercial premises on high streets up and down the country.

What can be done with vacant bank branches?

Not all banks are competitively located such as in a town centre and with consumers shopping online many retailers are structuring their businesses to do without the substantial overhead of owning or renting a commercial property. In many cases, freeholds of bank branches are owned by the banks themselves and they are competing with other empty properties for replacement tenants.  The harsh reality is that bank branches are not guaranteed to find a new tenant or to be reused.

However, if vacant banks are in a prime location, there are several options for their use such as offices, restaurants and bars. Another option would be to convert a bank branch into residential property, which can be an attractive proposition for those with the expertise.

Examples of bank conversions are noticeable on high streets up and down the country. Locally in Watford, Hertfordshire a previously unused bank building has been converted into a Costa Coffee. In Norwich the centrally located National Provincial Bank building has been converted to house the restaurant chain Cosy Club, making the most of its art deco architecture. Wetherspoons are known for converting disused buildings into pubs, with the Countering House in Glasgow letting revelers drink in an old bank vault.

What does the future hold?

Although branch banking appears to be dying out, some banks see it as an opportunity to reimagine what it means in the 21^st century. Lloyds have converted a former sweet shop located near St Paul’s cathedral in London into a “micro branch”. The branch has only two staff brandishing tablets to provide customers with the face-to-face service that they require. Lloyds intends to retain their flagship branches in major cities, but other locations will make the most of these micro branches to ensure that communities benefit from a branch in their local hub.

Although the big four banks are closing branches, some banks are reversing this trend.  Metro Bank has opened 68 branches since it became the first new high street bank to launch in the United Kingdom in 150 years in 2010 and aims to open 250 branches. Metro actively encourages customers to attend its branches by offering safety deposit boxes or to use its “Magic Money” coins counting machines free of charge. Metro have opened close to a million accounts and attribute this to the desire of customers to retain face-to-face contact, so there may still be the need for high street buildings to be used as bank branches.

Will I need legal advice to purchase a vacant bank?

We work with property owners and developers with banks as part of their property portfolios. We recently acted for a property investor in the £1.2m purchase of a former Natwest branch in North London which the client intends to convert into flats and a restaurant.

We also have the benefit of specialist planning lawyers should you need to make any planning applications.

Please contact Tom Marshall if you are looking for a lawyer to assist you with purchasing commercial property.