New Branches Are Rarer, Smaller and More Expensive Than Ever

Branches are getting smaller, and there are fewer and fewer new branches on the horizon. Even though they are one quarter the size they were ten years ago, they still cost about $1.3 to build.

By Steven Reider, Founder of Bancography

Ten years ago, Bancography surveyed banks and credit unions across the U.S. about their branch deployment plans. The study covered the number of planned branches, cost, and size of those branches. Bancography reprised this study in 2006, but skipped a few years as branch building slowed during the recession. Now, the economy reviving. Many institutions are expanding again, and there is significant attention being placed on the efficiency of branch footprints, so Bancography felt it would be appropriate to repeat the study and release an update.

Bancograrphy’s latest “Branch Construction Survey” was fielded in May 2013, with 70 financial institutions — both banks and credit unions — participating from all regions of the country and spanning all asset tiers.

How many branches will your institution add next year?

More than 70% of respondents plan to build only one or two branches in the next year, so most planned growth appears incremental rather than oriented toward widespread expansion. 72% of institutions plan to build traditional branches, 51% plan inline facilities, and 13% plan to add in-store branches (the proportions sum to more than 100% because some institutions plan to deploy more than one format). Non-traditional branches — inline plus in-store — represent 42% of all new planned branches.

( Read More: Branch Boom Gone Bust: Forecast Calls For Steep Decline )

What is the average square footage of the planned new branches?

The average size for planned freestanding branches was reported at 3,040 square feet, down significantly from 3,500 sf in 2006 and 3,900 sf in 2003; the median was 2,950 sf. Still, not all institutions are embracing smaller branches. One in four respondents said they are planning branches of 4,000 sf or more.

Among the planned inline branches, the average reported size was 1,950 sf, with the median at 1,800 sf. Planned sizes ranged from 750 sf to 4,000 sf.

What is the average construction cost of the planned branches (all inclusive, minus land costs)?

Reported freestanding branch costs ranged from $700,000 to $2 million, and averaged $1.3 million, down slightly from the $1.4 million in the prior survey. However, keep in mind that average square footage declined from 3,900 to slightly more than 3,000, so branches got significantly smaller while costs only decreased some. That means cost-per-square-foot for freestanding branches increased to $440, up from $360 in 2006 and $310 in 2003. Costs ranged from $220 per sf to more than $600 per sf.

For inline branches, reported costs ranged from $250,000 to nearly $1 million, averaging $530,000. Cost-per-square-foot ranged from $90 to nearly $500, and averaged $275 (median $250), up from $190 in the 2006 survey.

What is the average land cost of the planned freestanding branches?

Reflecting the wide regional disparities in land costs, the answers to this question exhibit the greatest variance. Responses range from $250,000 to $1.4 million. Costs tend to be much higher in the larger metros, especially in the Northeast corridor and the Great Lakes region. Consistent with a nationwide decline in real estate values, average cost was reported at $675,000, down from $1.1 million in the 2006 survey.

( Read More: Poof! Branch Transactions Drop By Half in 20 Years )

Other findings

Remote video tellers. 11% of institutions surveyed will use video remote tellers at all new branches, and 32% will use the technology at some new branches. However, 57% have no plans for video tellers.

Universal staffing. The universal agent model is under consideration at many institutions. 42% of respondents plan integrated teller-CSR (universal agent) workstations in all new branches, although 30% plan to install traditional teller lines in all new branches. The remaining institutions plan a mix of operating models.

Image-enabled ATMs are fast becoming standard equipment. 68% of respondents planning to use the technology in most or all new branches.

Teller Cash Recyclers (TCRs) are increasingly common. 53% plan TCRs in all new branches; and 16% in some new branches; but 31% have no plans to use TCRs. Teller cash dispensers (TCDs) are slightly less prevalent, with 54% of respondents planning to use TCDs in at least some new branches.

Safety deposit boxes. Only 31% of respondents plan to install safe deposit boxes at all new branches; another 20% plan to install boxes in some new branches. Traditional dual key vaults were 2.5 times more common than single key self-service vaults.

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This article was originally published on September 11, 2013. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.


  1. Very helpful information for banks and credit unions planning their network strategies, balancing branch delivery costs with other delivery channels and budgeting for individual projects. Our studies show that the increased cost in branch construction is primarily driven by four factors; the desire to deliver a unique and highly competitive brand experience for customers and staff, significantly higher productivity and operating efficiency expectations from each square foot (evolution of the branch business model), need to increase market penetration and productivity with more small branches, and inflation in the construction industry.

    Land cost in many areas of the US dropped 10% to 50% over the past five years and is now starting to rebound. Banks and credit unions should consider land-banking great sites for the next three to four years of growth now rather than waiting for a “just-in-time” purchase.

    Current performance tracking systems include dashboarding important financial information. There is an additional tool that can help institutions understand the productivity value of each branch. Just like retailers, bankers can compare deposit and loan data to branch square feet. This provides a facility related measurement. Additionally, knowing the number of members per square feet can provide a measurement that helps understand branch capacity and when you need to plan for expansion, closure relocation or a branch addition to a network. We use these figures in our network optimize with excellent results.

    This all gets down to balancing capital and operating cost of a branch with market potential – building the right branch for each market in terms of product and service components, configuration, technology integration, size, fit and finish and total cost.

    Thank you Steven for this survey information.

    Paul Seibert, CMC EHS Design

  2. Barry Lynch says:

    Our first experience with the shrinking footprint centers on changing attitudes about risk. We provide Strategic Facility Planning, Real Estate, Design & Construction for Banks & Credit Unions, primarily in Louisiana and points east. Credit Union Boards in our area have been willing to risk an investment of $100,000 – $250,000 for construction of In-Line Branches coupled with $250,000 for “other” expenses (Bank equipment, signs, furniture etc.) with the mindset that if the location fails, the $250,000 of “other” expenses can be redeployed or relocated. The investment “at risk” is typically 7%-25% of the investment required for free-standing branch construction and property acquisition.
    Our second insight is “strategic opportunism” – that is clients with strategic location goals taking advantage of vacant free-standing retail facilities (coffee houses, burger joints, etc.) that they would not have considered previously. The cost of purchasing these properties then renovating has consistently been 50%-60% of the cost for a greenfield branch of the same size at the same location. Please note: land values in the deep south have not decreased over the past 5 years.
    Interestingly, Clients that have cautiously “tested the waters” with In-Line Branches, converted coffee houses and other “small footprint options” over the past five years have gathered a significant amount of performance feedback and are proceeding with “bolder” branch plans. These institutions have typically experienced healthy growth. Those who have sat on the side lines continue to sit.
    Excellent survey and report!
    Paul – we appreciate your insights.
    Barry Lynch, CFM, NCARB, SFP, MBA, IFMA Fellow, Labarre Associates, Inc.

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