The consolidation of banks has left its mark on nearly every community center in America. Once-prized regional headquarters now stand in prominent spaces as under-used and over-sized retail branches — costly relics of past acquisitions whose lost grandeur is evident to every branch customer and staff member. While leaders focus on growth, the haphazard transition of legacy centers into largely vacant branch buildings silently erode value year after year, with their financial impact unmeasured and overlooked.
As experts in addressing this silent drain on value, we offer bank executives and board members a clear example illustrating the opportunity cost of inaction. Below we will describe an example we’ve modeled and for those curious, we are happy to share our detailed analysis upon request.
Suppose your institution operates 10 oversized branches, each spanning 20,000 square feet—but each branch’s actual needs only require 12,000 square feet. That’s 80,000 square feet of formerly active business space, sitting vacant within community centers.
There are three paths to consider:
- Maintain the status quo, leaving each branch “as is.”
- Pursue a strategic sale-leaseback and modernization initiative, reactivating the business capacity of the building.
- Close the branch entirely, walking away from a community presence and surrendering market share.
The third option—closing an oversized branch that operates expensively but otherwise well—would be damaging. Banks may lose considerable deposits within 12 months of a branch closure, as customers migrate to in-market competitors rather than follow the institution elsewhere. In many cases, closure isn’t even feasible: community pressure, regulatory scrutiny, and long-term reputational risk make it a nonstarter. This choice offers no future upside, sacrifices customer relationships, and permanently cedes territory.
For these reasons, we can rule out closing the branch as a viable option for a healthy bank, and focus on comparing options one and two – Maintain the status quo or a strategic sale-leaseback and modernization initiative. Our question is: What’s the cost of doing nothing?
First, there’s deposit attrition. Oversized, outdated branches often don’t meet modern customer expectations. Without reinvestment, these locations underperform in deposit growth, losing ground to competitors with more inviting and efficient spaces. Neglected branches typically land at the bottom of network deposit growth metrics, while renovated and rightsized branches—particularly those converted into multi-tenant business hubs—become top performers. Let’s say a typical healthy converted branch, might see deposits grow by 5% per year, whereas an outdated partially vacant branch may struggle at 2.5% or less. Over time, that gap compounds. Ten oversized branches each with $50 million in deposits today, will have 43.5% fewer deposits in 15 years, a combined $315 million deposit shortfall. As a result, these same branches lost out on generating roughly $266 million in net interest income due to the poor deposit growth.
Second, there’s the issue of tied-up capital. Oversized branches represent locked-up assets typically with higher depreciation than modern branches, that could otherwise fuel growth. In a strategic sale-leaseback, 10 such branches could conservatively generate $8 million in after-tax capital gains, which could be 10x leveraged and reinvested at a 3% net interest margin. Over 15 years, that additional deployment would yield $121 million cumulatively in net interest income. By doing nothing, institutions defer these gains and forgo opportunities to strengthen lending capacity, fund technology initiatives, and boost shareholder returns.
Third, deferred maintenance and depreciation over 15 years make these outdated branches increasingly difficult to operate or divest. Rather than capitalizing on a higher resale value today through a partial-lease structure, a bank may eventually be forced to sell at a deep discount and close the branch entirely, losing deposits to competitors in the process. Deposit decline and lost capital opportunities compounds on the downward growth, adding to the cost of inaction. Even if it chooses to rebuild, the bank faces the costly task of purchasing new land, navigating regulatory approvals, and constructing branches on less favorable sites—all while distracting from core operations and undermining financial performance. Attempting to relocate customers also opens the door for rival institutions to poach deposits and accounts during the transition.
A Strategic Alternative: Partial Sale-Leaseback + Modernization
Real estate decisions aren’t just about square footage; they also influence deposit growth, capital efficiency, and brand perception. A dated, half-empty branch signals inefficiency and stagnation. Meanwhile, a modernized, rightsized branch exudes innovation, operational discipline, and customer-centric investment. A programmatic sale-leaseback and modernization strategy with an experienced buyer unlocks trapped capital, improves branch performance, and enhances shareholder returns. Most importantly, it shifts real estate from a neglected afterthought to a vital component of overall strategy.
Calculate The Cost of Inaction for Your Branch:
What’s Next?
If you’re a CEO, CFO, Head of Real Estate, or board member assessing your branch strategy, ask yourself: How many oversized, underperforming branches are quietly eroding your institution’s value? Consider the long-term costs of inaction—and the opportunities you have today to proactively reposition these properties for growth, efficiency, and profitability.
Our team is ready to share detailed insights and practical analyses tailored to your situation. Contact us here to start the conversation. Because the greatest risk isn’t making the wrong move—it’s taking no action at all.