Winning From Downtown
Was Petula Clark really talking about credit union branch strategies when she sang, "Everything's waiting for you-downtown?"
As credit unions have moved to community charters or added low-income areas to their fields of membership, some have naturally gravitated toward downtown business districts. But members of The Credit Union Journal's panel of facilities experts said effective branches in downtown areas require a tailored strategy.
"Downtown is very different from the suburbs," said Paul Siebert of EHS Design. "When you have 10,000 households in a one-mile area, people want to be able to walk to get where they're going. That's why when financial institutions go downtown, they have to go with more branches, and they're usually smaller. They're in places where people can walk to either from home or from where they work."
Indeed, where in the suburbs, vehicular traffic counts are king, in downtown areas, the key is foot traffic.
"That is probably the biggest hurdle to overcome," noted Mike King of DEI, Cincinnati. "You have to evaluate not only the general population but also the projected population, because often times you don't have as many people living downtown but lots of people working downtown. You look at where the parking garages are, where the train stations are. Where are the restaurants and retail? It's not that people do different things when they are downtown-they live there, they work there, they eat there, they shop there-but it's that they do those same things differently."
Typically, things tend to be more expensive downtown, in particular real estate, which can be a problem simply because there's a lack of undeveloped and/or available space. But there can be benefits: "Sometimes there are tax advantages to going downtown," King noted.
On the other hand, noted both King and Siebert, good luck finding a location downtown where a credit union can build a freestanding facility, much less support a drive-through.
"There's just no land available, which means less opportunity for drive-throughs," Siebert offered. "We're still seeing land prices skyrocketing. It's also a problem in terms of having enough parking if people are still driving there. We're seeing more ground leases because of the land prices, and those are just awful. What it means is that eventually you own a building on someone else's property."
More often than not, going downtown means leasing space in a pre-existing building, and that can have its advantages and disadvantages.
In Winston-Salem, N.C., for example, Truliant put a branch in a federal building in a downtown area because those federal workers are in its FOM, King related. The problem was trying to reach out to anyone in the area who isn't a federal worker.
"Pretty much the only people they could serve were the federal workers in that building, because due to security, no one else could get in there," King observed. "If you have a SEG downtown and you want to put a branch there, that's fine, but you have to realize that may not be the best jumping-off point if you're trying to expand beyond that SEG."
And you can't just lease any old space. "You have to be on the first floor with storefront visibility," he suggested. "If someone has to get into an elevator and go out of their way to get to you, they're not going to go to you."
Credit unions looking to go downtown also need to realize that what worked for them in suburbia might not work so well downtown.
"You don't want to give your downtown branch a southern, country feel to it," said DEI's Kim Rittmeier. "You want something more like Starbucks, something contemporary and upscale to match downtown."
Even things like hours of operation and the dress code for employees comes into play.
"If you're downtown and there's a mass exodus at 4:30 or 5 p.m., you don't want to be open when no one is there," King advised. "Now, if you're situated near theaters, shows or restaurants that are open into the evening hours, you might choose a couple of nights to catch those people who are coming into the city for non-work reasons."
A different product and service mix may be called for, as well. "The general consensus would be that with more foot traffic, more of the business would be transactional in nature, but not necessarily," King counseled. "You just need to look into ways to streamline your lending operations."
Evaluating the performance of a downtown branch is different, too.
"You need to have different expectations in these markets and different measurement tools for different areas," Siebert offered. "The urban market is more mature, but often credit unions are not there. It can be a good place to go to develop the Hispanic market or the low-income market. And as more downtown areas undergo revitalization, there are even more opportunities."