Banks put brakes on branching out in NYC

Crain's New York reports:

The great Manhattan bank branch boom is over.

Financial players that paid top dollar to rent hundreds of retail locations, pushing out neighborhood coffee shops, florists and fashion boutiques, are ending their shopping spree, real estate sources say.

“All bank leasing has stopped,” says Steven Durels, director of leasing at SL Green Realty Corp., one of the city's biggest real estate firms. “For the past three or four months, there haven't been any banks coming through here.”

While market saturation is a culprit in the turnabout, experts point to the credit crisis as another major factor. Banks have lost billions from the subprime mortgage meltdown. Citigroup alone reported write-offs of $18.1 billion for the fourth quarter of 2007. Another major player in the branch bonanza, J.P. Morgan Chase, wrote off $1.3 billion. Banks just don't have the cash to keep building branches at the same frantic pace. Without them to bid up retail space, rents could start dropping, brokers say.

Even bankers admit that the expansion days are behind them.

“There is an end point in sight,” says Jeff Barker, region executive for Bank of America's New York market.

The deals started drying up late last year, says Neal Ohm, a real estate broker at CitySites Commercial Group. At the time, he had three banks making offers on a 3,000-square-foot space on the corner of Grand and Center streets in NoLIta, but “within a week, they all backed out,” Mr. Ohm says.