Special Report: How Banks Took Over the West Side

by - November 23, 2009 at 10:29 pm -

By Victoria Finkle
There was a certain irony to the controversy that erupted in 2006 when Apple Bank decided to convert the top seven floors of its landmark building on 74th Street and Broadway into luxury condominiums. Preservationists feared that the 1928 building would lose its iconic character when its upper floors were turned into something other than a bank.

Meanwhile, banks have been turning the rest of the Upper West Side into a kind of walk-through ATM, helping push out the small businesses that give the neighborhood its charm.

The limestone Apple Bank still looks much as it did in 1928, but the Upper West Side has changed dramatically in recent years. Independent bookstores, markets, and boutiques have disappeared, and “in the place of all these old friends are cell-phone dealers, chain drugstores and, of course, banks. Wherever one looks is a walk-in bank,” wrote actress and Upper West Side resident Lee Grant in an impassioned letter to the New York Times this past August.

Since 2002, the number of bank branches on the UWS has almost doubled, with branches now outnumbering Starbucks three to one. This compares to nationwide bank branch growth of about 15 percent over the same period.

As of this summer, there were 47 bank branches on the Upper West Side, according to data from the Federal Deposit Insurance Corporation (we looked at FDIC data for zip codes 10023, 10024, and 10025). Include credit unions and stand-alone ATM’s and the number climbs to 53.

Banks and ATM’s on the Upper West Side (zip codes 10023, 10024 and 10025, and part of 10019). List compiled by Councilmember Gale Brewer’s office.


To be sure, banks are not the only major corporate chains on the block. And chain stores are not the only ones to survive, or even thrive, in the area.

“As the Upper West Side has become a headquarters for affluent families, a number of independent stores and small chains have opened up,” explains Faith Hope Consolo, a prominent city Realtor and chairwoman of Prudential Douglas Elliman’s retail division. “So yes, we have Apple, but we also have Only Hearts. We get Trader Joe’s and Whole Foods, but also Gourmet Garage.”

Nevertheless, as demand for commercial property has grown, prices have followed suit. Between the spring of 2001 and the fall of 2008, average retail asking rents swelled almost 60 percent on the Upper West Side, according to data released in May 2009 by the Real Estate Board of New York.

For small business owners already on the edge, the rise in prices proved unsustainable. And worse, national chains, including banks, were likely at the root of this surge. “National chains certainly do play a factor in driving up rents…particularly when the economy is strong,” says Consolo.

bank branches data

When renting commercial space, it turns out that property managers operate much like the Federal Reserve, working most closely with those deemed “too big to fail.” Put simply, banks and chains have large corporations standing behind them, and property managers like the financial security that entails. This means that small businesses must compete with what Consolo calls “the nine hundred pound guerrilla” of big business.

“We have had property managers looking for higher rents [and] their hope was that they could get a chain or a bank in there,” says Peter Arndtsen, the manager for the Columbus-Amsetrdam business improvement district, which covers the area between 96th and 110th Streets. “They had this expectation that they could get a higher rent than a smaller store.”

Particularly during boom times, large corporations have better credit and are perceived as more likely to pay rent every month. Large corporations may even be willing to open a store in a popular retail area like the Upper West Side at a loss, just to establish a brand or keep shoppers from going elsewhere. Further, they are more likely to lease multiple spaces around the city and combine adjoining commercial spaces, a perk for property managers looking to fill as many vacancies as possible in one fell swoop.

Unfortunately, the interests of property managers do not always coincide with the needs or demands of neighborhood residents. For residents, local businesses are “the heart and soul of the neighborhood,” says District 6 City Councilmember Gale Brewer. “The trouble with having so many banks is that it kills the excitement of a streetscape.”

hsbcThe desire of property managers to lease to that new bank or chain retailer has also increased the number of vacancies in the area, another drag on neighborhood appearance and vitality. Some property managers are content to let commercial spaces stay vacant for months or even years, holding out for that big corporate fish.

“It doesn’t make any sense to me, but it’s something that’s a part of some managers’ strategy, I guess,” says Arndtsen.

Though rumors have circulated that property managers may actually profit from keeping a storefront vacant, Councilmember Brewer has found no evidence of tax benefits conferred to property managers who fail to rent their properties, after contacting several state and local tax authorities on the matter. She notes that a number of constituents have contacted her with concerns about so many vacancies in the area.

Arndtsen, who created a page on the Columbus-Amsterdam BID’s website to track local commercial vacancies, has heard similar complaints from local retailers. Business owners want to be located on blocks that are vibrant and likely to attract shoppers.

Being located next to an empty storefront with “a gate down or even …a sign in the window saying that it’s for rent isn’t really going to attract anybody that is likely to shop in one place. You really need to have a grouping of stores in one place to make it attractive,” according to Arndtsen.

But, leaving aside the fact that some property managers are eager to land a deal with chain retailers, the question remains: why are there so many banks? According to Consolo, “Banks were always a player, but post-9/11 they became a major player because they were more active than other sectors of the market.”

Of course, banks would not have opened in the neighborhood at such a pace if they did not believe it would be profitable. A study by the FDIC in 2004 found that although opening new bank branches is expensive for financial institutions, banks with larger branch networks tend to be more profitable than competitors.

bank of americaIn fact, consumers nationwide continue to rank location of bank offices as the most important reason for choosing a particular institution for their main checking account, according to data from the Federal Reserve Board’s Survey of Consumer Finances. In 2007, 46 percent of consumers ranked location highest among their priorities in choosing a banking institution. Despite the vast growth in online banking technology, this figure has actually increased slightly over the past decade.

Nevertheless, the bottom line is that banks represent just one player in a larger cyclical process of neighborhood development, a process in which the scales seem to be tipped towards large corporations. And, at least in the short term, banks may have played themselves out. Bank branch expansion has slowed dramatically since 2007 on the Upper West Side, and there was no new growth between 2008 and 2009, likely the result of the recession. Consolo predicts that apparel companies and home furnishing stores are likely to be the next big movers in the area, as the “nine hundred pound guerilla just puts a different suit on.”

In the meantime, the recession may actually provide an opening for some small business owners in the area. The average asking rent in the neighborhood has taken a major hit in the wake of the financial crisis, falling by about 25 percent between the fall of 2008 and the spring of 2009, according to the most recent data from the Real Estate Board of New York. As a result, “property managers seem to be much less inclined to wait for a chain or a bank,” according to Arndtsen.

Of course, it’s too early to tell if the recession will eventually lead to a turnaround for small business on the Upper West Side. While lower rents may attract more small business owners to the area, owners will still need to compete with the national behemoths to survive. And they will have to do so with fewer total dollars floating around, as retail spending and consumer confidence remain shaky. Ultimately, it’s up to local residents to open their wallets if they are committed to keeping small businesses in the area. After a quick trip to the bank for some cash, that is. (Bank chart and photos by Victoria Finkle. Map and photo illustration by Ben Zapp)

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  1. paul says...

    Ummmmm, its easy to blame the banks. But if no one used the banks then they would not be there. There is clearly a connection between upper middle class people in the Upper West Side and the number of banks.

    The banks follow the rich. If it was a very poor neighborhood, then the banks would not be there.

  2. Dennis says...

    Bank branches take up probably no more than a few percent of the total retail space of Manhattan. The article conveniently forgets to mention that the Upper West Side now has perhaps a coupla hundred more non-chain restaurants worth eating at than it did 15 years ago, that Manhattan has hundreds more boutiques – from quirky to lavish – for the fashion-conscious than it did 15 years ago, that Whole Foods and Trader Joe’s – pathetic as they are – are still a monumental improvement on the filthy bodegas of yesteryear.

    Just another half-baked, shamelessly one-sided article featuring politically correct whining on the topic of gentrification. Yawn.

  3. Joe Walsky says...

    The law of diminishing returns states that if the total number of banks reaches a saturation point, then they’ll begin to disappear. I believe that, like most other things in life, this is merely cyclical. In another 5 years there will be an abundance of small businesses, then followed by another surge of large corporation chains. The only thing that will slow it down, as is pointed out in the article, is how long the head honchos are willing to deal with a branch that is hemorhagging money. Perhaps all those bank chains will be replaced with simple ATMs. Good read overall with helpful maps and graphs

  4. s says...

    Interesting comments, but Paul’s point about “banks follow the money” is, in fact, wrong. National banks – Citi, Chase, Bank of America, etc. – have significant retail banking programs that don’t necessarily base site selection on customer demographics. In fact, they see retail banks in many cases as “ads” for their bank brand, and an opportunity to reinforce their brand image. Hence, there’s a Bank of America branch or ATM every few blocks on Broadway not because its making them money, but because they want to build their brand and each branch and their respective signage builds that brand.

    Think about it for a moment– strategically banks don’t really need more retail branches. In fact, they would really prefer it if most of their retail customers didn’t even set foot in one of their branches; it’s much less expensive for them to serve their customers online, and that’s the direction they really want to go.

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