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Banks have been a gloomy topic in the retail/commercial real estate world for the past few months. The summer of 2007 marked the beginning of drastic changes in the banking industry. Banks like Commerce Bank, PNC, Citibank, Bank of America, Wachovia and Chase were opening locations left and right. Banks were in bidding wars to take freestanding buildings at busy intersections and highly visible corner buildings in cities across the United States. Here in the Washington D.C. area, I heard stories about banks paying as much as $500,000 annually for a ground lease. Basically, they had to pay a lot of money for some dirt and then build a building. As always, markets move like pendulums and the bank market started to make its way down around July.

Nobody is certain of the single cause for banks slowing down, but it is fair to say that 1) the credit crunch, 2) slower home growth/undertain housing market and 3) hypergrowth. The first two issues are all over the news, but point 3 is rarely spoken about outside the real estate community. There are just too many banks in one market and they are all over each other. I understand they are fighting for deposits, but there are only so many people and over saturation was inevitabe in many cases.

People are expecting the banks to come back roaring in 2010. It will certainly be interesting to see what happens. I predict that some banks are going to be bought and others are going to get rolling opening more sites.

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