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retail banking retail banking

Bank Branches: Navigating the Post-Digital Landscape

John McWilliams • 12/11/2023
The local bank branch is changing dramatically—but it’s not going away. Despite a decline in the number of bank branches across the U.S., physical bank branch locations remain critical to banking operations, as they help to create and foster relationships with consumers. Today, bank branches are closing—with some strategically reopening—to meet demanding consumer needs and adapt to a post-digital era.

Key Takeaways: 

  • Essential role of physical locations: Despite a decline, physical bank locations remain vital due to industry mergers, technological advancements and banks’ unparalleled value in building relationships and trust with consumers.
  • Diverse growth trajectories: Banks with assets over $300 million have experienced a 13% branch growth since 2001, contrasting with a 45.6% decrease for banks with assets under $300 million. Net-closure percentages vary significantly among states. Nine states with more than 1,000 branches showed growth since 2000, but all states showed a decline since 2010.
  • Transformation of in-branch experience: Anticipated net-closures and reduced branch density are reshaping the in-branch experience. This shift is driven by industry consolidation, consumer reliance on physical branches, and the adoption of post-digital era business strategies that drive real estate portfolio optimization for U.S. banks.


What’s happening with bank branches then? 

They are being closed, and opened, strategically 

Banking institutions are strategically optimizing their portfolios, eliminating redundant locations from M&A activity and reducing real estate costs to refocus on their target markets and open new locations that transform the in-branch customer experience. Since technology enables check deposits, fund transfers and bill payments, banks are optimizing their physical branches to serve needs best met in person. 

Examining branch closures illuminates a trend of dwindling bank branches across the industry, but measuring closures exclusively doesn’t reveal the true nature of what’s happening. A net figure reveals a more complete picture of the retail branch climate in the U.S., as it shows the true change in the number of bank branches. The ratio of closed-to-opened branches peaked early in the pandemic but dropped below 2017 levels in 2023. 

Number of Closed Bank Branches for Each Newly Opened Branch by Year

chart 1

Source: Cushman & Wakefield Research, FDIC, 2023

Over the past few decades, there has been a decline in the number of FDIC-insured branch offices in the U.S. As of June 30, 2023, there were 77,825 FDIC-insured branch offices—9% fewer branches than in 2000, 21.5% fewer than the 99,550-branch peak in 2009, and 9.9% lower than 2019’s pre-pandemic total of 86,392. From 2001 to 2009, the industry experienced a consistent increase before reversing in 2010. Net closures have been sustained since 2010, with each subsequent year seeing an average reduction of 1,555 branches compared to the previous year.1

Change in Total FDIC Insured Branch Offices 2000-2022 
chart 2

Note: 2023 Total calculated from closures through June 30, 2023 
Source: Cushman & Wakefield Research, FDIC, 2023 

Top/Bottom 10 Losers by Percent Change in Total Branch Offices from 2019, States With More Than 1,000 Branches
chart 3

Source: Cushman & Wakefield Research, FDIC, 2023 

Examining the largest banks, each with consolidated assets over $300 million, gives further depth to the trend, as branches in this category have grown by 13% since 2001.2 This contrasts the figure for banks with less than $300 million in consolidated assets, which declined by 46.5%, as well as the broader FDIC-insured branch figure, which decreased 9.6% over the same period.3 This suggests that the majority of net closures have occurred in banks with less than $300 million in consolidated assets and reinforces the idea that industry consolidation is a key driver of branch closures—as larger banks absorbed smaller ones, and their branches and began eliminating redundant locations. 

They are getting smaller 

Bank branch features of the past, such as numerous teller lanes, are being dropped in favor of space efficiency, as branches leverage technology to reduce real estate costs and improve their customers’ experiences. The historical leasing and purchasing behavior of the five largest banks (by consolidated assets in 2023) shows that the average new branch location has decreased its square footage by 46% from 2000-2023 YTD. 

Average Size of Branch (sf) Moved Into by Year, Top 5 Banks 

Source: Cushman & Wakefield Research, 2023 

What are banking institutions doing? 

They are continuing to engage in M&A activity 

Banks engage in M&A for a variety of reasons, as it allows them to diversify geographically, benefit from increased economies of scale, leverage investment in technology, increase revenue and market share, and accelerate expansion in their branch networks. Since 2000, there have been 5,681 unassisted mergers among U.S. banking institutions.4 The aftermath of the Great Recession led to a significant dip in M&A activity from 2009-2012, recovering until the pandemic saw a similar decline from 2020-2022. Though M&A activity is currently below historical annual averages, 433 mergers and acquisitions have taken place since 2020. 

Number of Unassisted Mergers Amongst U.S. Banking Institutions, 2000-2022 
Source: FDIC, 2023 

They are leasing and purchasing fewer branches  

Leasing and purchasing activity by the five largest banks in the U.S., which account for 21% of all branches, has been declining.5 Their branch leasing and purchasing activities peaked in 2009, along with the number of branch locations in 2010. Since then, these banks have actively reduced their branch networks by 25%, aligning the 2023 figure with pre-recession levels, as part of an effort to optimize portfolios, eliminate redundant locations and enhance spatial efficiency.  

Square Feet of New Retail Bank Occupancies Nationwide by Year 
Note: Bank names have been removed and data randomized across years. 
Source: Cushman & Wakefield Research, 2023 


They are listening to their customers

The banking sector has seen notable shifts in customer preferences recently. While financial advice and digital services are still valued, an increasing number of customers consider trust to be most significant. In a 2023 survey of more than 30,000 people, 57% considered trust as the foremost factor in their perception of their bank, an increase of 12 percentage points year-over-year (YOY). 

There is also a rising trend in customers that prefer in-person banking interactions. In a 2022 Statista survey of nearly 60,000 people, 46% conducted their banking in person at a branch, up from 28% in 2021. 

In 2022, 67% of consumers over the age of 18 indicated that they like seeing bank branches in their neighborhood because it represented bank stability and availability. Additionally, consumers prefer visiting a physical bank branch when opening new accounts, receiving financial advice or  purchasing financial products.6


What is most important to you when you think of your bank?   How do you process your banking matters with your primary bank?  
chart  chart 
 Source: Statista, 2023  Source: Statista, 2023


What does this mean for retail bank real estate? 

From a real estate perspective, bank branch closures are impacting both the type of real estate bank branches are looking for and who they’re competing with to get it. Large branches on the first floor of an office building, strip center branches and micro branches in grocery stores are not being pursued—and some are being phased out. As branch size continues its downward trend, banks will compete with other users of smaller, high-visibility, retail pad sites, such as those that are sought after by free-standing, fast-casual restaurants. Legacy branches that are no longer occupied by banks are purpose built and may take a while to be backfilled. 

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