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Unlocking potential Former bank branches continue to attract redevelopers.

Byline: Jason Scott

In commercial real estate, investors regularly take old buildings designed for one purpose, like an office, and breathe new life into them as apartment buildings or retail shops.

Over the last decade, bank properties have become a bigger part of this repurposing trend.

As banking moves online and bigger banks grow through mergers and acquisitions, bank branches have been closing. In a recent study, consultancy McKinsey & Company said that more than 10,000 U.S. bank branches have closed since the last financial crisis.

Central Pennsylvania is not immune to the changes, which lead to former bank branches going up for sale. Sometimes they are bought by another bank or financial services firm, while other developers convert old banks to offices, restaurants or stores, among other uses.

For Realtor Mike Pion, his something old that will be new again is a former Mid Penn Bank branch in Camp Hill.

Pion, the owner of residential real estate firm NextHome Capital Realty, bought the property at 2101 Market St. in early July. He plans to renovate the old bank and move his company from neighboring Hampden Township by the beginning of 2019.

Pion was able to swoop in and buy the vacant 1950s-era bank branch after plans to put a brewpub there were scrapped. Before buying the 6,000-square-foot building, he looked at other options on the West Shore, including a former Susquehanna Bank property in Lemoyne that was later converted into a coffee shop and juice bar.

The Mid Penn branch, at Market and 21st streets, closed in early 2017 when it moved down the block to another former bank property with better drive-thru access. PNC Bank also once called the 2101 Market St. property home.

"It's old and we want to bring it back to life," Pion said.

His plan includes opening up more of the walls to put in group work stations and meeting areas with glass doors for agents to meet with clients. He also wants more open training and multimedia spaces for agents.

"It's a huge open space and that's where real estate is going, more flexible space," Pion said. "We think it makes more sense as an office than as a bank."

But not everything old about the bank is going away as part of the construction, which is expected to begin this fall.

On a mid-August tour of the building, Pion walks through the basement and into the old bank vault.

Hundreds of empty safe-deposit boxes line the outside of the vault. Pion said he would like to clear out the boxes and open up the vault at least once a month to the community. He thinks it could work, for example, as a pop-up shop where local artists could promote and sell their work.

NextHome plans to turn the rear ATM into an outdoor patio area for employees, while the drive-thru teller window will be converted to an indoor coffee bar for the business.

Jim Koury, an agent with RSR Realtors who handled the property deal, said he believes bank branches will continue to hit the market.

Big deals over the last three years, including BB&T buying both Susquehanna Bank and National Penn Bank, led to some branch closings in Central Pennsylvania. Other large banks like M&T Bank and Citizens Bank also have been closing branches in the midstate.

But redevelopment interest can be spotty, Koury said.

Most former bank branches are located at very visible locations, which makes them attractive to other banks that are looking to enter a new community. Earlier this year, NexTier Bank, a western Pennsylvania bank, bought a former FNB branch on Trindle Road and opened a loan production office there.

But demand from financial institutions is dwindling, Koury said. Like large retailers with big e-commerce competition, banks don't need as many brick-and-mortar locations. The exceptions are growing credit unions like Members 1st Federal Credit Union, which continues to add offices.

Some banks also put deed restrictions on sales of their old branches to limit other banks from moving in and competing with another nearby branch.

Other office and retail users could derive more benefit from these older bank properties, Koury said.

"The existing build-out inside doesn't matter because the users can adapt to work with it. The draw is the location," he said.

Of course, mergers in other industries can sometimes free up space for banks. For example, Orrstown Bank moved into a former Coldwell Banker office on Market Street in Hampden Township. The Coldwell Banker franchise no longer needed the space after it was acquired by NRT LLC and combined with company-owned Jack Gaughen Realtor ERA down the road.

"It depends on the property," said Heather Kreiger, a brokerage adviser with Rock Commercial Real Estate LLC in York.

Kreiger has worked on several bank listings over the last year, mostly in York County, and many don't go back to being banks.

In addition to retail and restaurants and other office uses, she has seen religious facilities crop up in old bank sites as well as funeral homes.

"I continue to see (banks) come on the market," she said. "I'm not sure if it will be a high pace, but I don't think it will stop tomorrow."

And redevelopment, especially in high traffic areas, could pick up as new construction costs rise, said Harrisburg appraiser Jeff Walters of Walters Appraisal Services.

"Conversion didn't used to make sense. You used to demo a building and start over," he said. "But as time goes on, stormwater management costs impact site selection. Converting the same footprint may be more economical than buying a new piece of ground."

Indeed, that's what happened with the old BB&T regional office in Lititz. Penn Medicine Lancaster General Health recently acquired the property to relocate office workers, rather than build new. The North Cedar Street property was the headquarters for Susquehanna Bank before BB&T acquired it in 2015.View the full article from the Central Penn Business Journal at Copyright 2018 BridgeTower Media. All Rights Reserved.

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Author:Scott, Jason
Publication:Central Penn Business Journal
Geographic Code:1USA
Date:Aug 31, 2018
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