Bank buildings are becoming restaurants: here's why
Former bank branches, with their vaults and unique layouts, can be a challenge to lease or sell, experts say. But with their usually prime locations, they can be attractive for other uses.
Athan Margetas wanted to open a second location of The Vault Pizza & Deli, his Italian restaurant and pizzeria in York.
The eatery's original location on South Edgar Street used to be a bank, which is where the restaurant's name comes from. As luck would have it, In January, Margetas' father, Pete, was banking at the M&T on Carlisle Road in West Manchester Township when he learned the branch was closing.
Margetas immediately told his son, which led to Athan Margetas buying the building for $350,000 and spending another $650,000 on renovations and furnishings. Margetas blew out one of the walls to the bank vault to turn the space into a kitchen. He installed new bathrooms and a U-shaped, granite-topped bar, among other changes.
"They're great solid buildings, but they're intended to be banks," Margetas, 35, said of the work and expense it took to convert the building into The Vault Pizza & Grill. The restaurant opened in July.
Margetas' restaurant is an example of how excess bank space is being put to new use. And around Pennsylvania, including York County, there are plenty of empty banks waiting to be repurposed.
Available real estate
Banks closed 159 branches in Pennsylvania in 2015, according to data compiled by research firm SNL Financial. Only new 45 branches opened in the state that year, leaving Pennsylvania with a net loss of 114. That was second only to California, which had a net loss of 147 branches.
The number of branches is shrinking in York County, too. The county had 147 as of June 30, 2015, according to Federal Deposit Insurance Corp. data. That was down from 156 two years earlier.
What's happening in York County is part of a national trend. In some cases, mergers have left banks with overlapping locations that are too close together. In other cases, banks are pruning their branch networks because fewer people are visiting them -- they're doing most of their day-to-day banking by smartphone or online. For many customers, the only time they enter a branch office is to open an account or seek help with a service issue, said Anita Newcomb, a Columbia, Maryland-based banking consultant.
At the same time, banks are also looking to cut costs. Persistently low interest rates mean banks are making less from lending. At the same time, the cost of complying with regulations stemming from the Dodd-Frank financial reforms is also eating into their profits, Newcomb said.
Across York County, at least four former bank branches are vacant. That includes the former Citizens Bank building on Continental Square in downtown York, which closed in 2012. Developer Derek Dilks plans to turn the building into apartments, a coffee shop and a restaurant. Dilks expects to purchase the building from York's redevelopment authority in March or April. He's talking to a couple of prospective restaurant operators and hopes whomever leases the space will incorporate the bank's vault into the restaurant.
The number of excess branches locally could increase. Northwest Bank said late last month it plans to close 24 locations across its four-state footprint. A company spokesman declined to say where the closings will come. But he said Northwest's eastern region, which includes York County and several neighboring counties, would be impacted.
To be sure, some banks are expanding their branch networks. PeoplesBank, for example, opened a branch in Shrewsbury in early 2015 and plans to open one in Hereford, in Baltimore County, Maryland in April.
Banks' efforts to shrink their branch networks presents opportunities for others looking to step into buildings that are usually on busy steets with the kind of traffic that stores and restaurants crave.
But the buildings' layouts can make finding buyers or replacement tenants a challenge, said John Birkeland, a brokerage advisor with ROCK Commercial Real Estate in York, who has handled listings for several former bank branches. Chain restaurants usually have a uniform layout for their locations, which makes it tough to interest them in leasing or buying former banks, Birkeland said. He leased a former M&T Bank branch in Dallastown to Krua Thai Cafe, a husband-and-wife-run restaurant, that opened there last year.
Vault can be a problem
Having a bank vault in the middle of the building can limit the number of prospective buyers or tenants, Birkeland said. Removing the vault is an expensive proposition. It cost about $45,000 to remove the vault from a building in a shopping center in Palmyra in Lebanon County in order to accommodate a new tenant, Birkeland said.
Abe Khan is handling the leasing for a former Fulton Bank branch at South York Plaza in York Township that's been vacant since it closed in March 2014. Khan, who works for Bennett Williams Realty, is targeting banks and credit unions as possible tenants. Khan's talking with two banks that already have branches in York County. But he also hasn't ruled out the possibility that the freestanding building could be attractive as medical office space or as a restaurant.
"You certainly have to think outside the box to get them filled," he said.
Meanwhile, bank branches are never going disappear entirely, said Newcomb, the banking consultant.
Banks will always "need a physical presence in the community," she said.
Bank branch closings by the numbers
159: Bank branches closed in Pa. in 2015
114: Net loss of branches in Pa. in 2015 (closed branches minus new branches)
2nd: Pa.'s rank in net branch closings in the U.S.
147: Number of branch branches in York County as of June 30, 2015
156: Number as of June 30, 2013
Sources: SNL Financial, Federal Deposit Insurance Corp.