Now that we know how the Corporate Stabilization Fund is going to impact the expense side of credit union balance sheets, it is time to implement plans to offset these sky-high, but lower than expected premium expenses with additional revenues. But where might these additional revenues come from? Through increased access to your revenue-generating products and services.
One way to increase revenues is to increase and improve your presence in the marketplace and now might be a great time to consider relocating, adding a new branch location or altering your existing space.
In the current economy, many competitors to credit unions are back on their heels with poor public confidence problems. Meanwhile, the public is still looking for safe financial products and services that your credit union can offer. The time is right for credit unions to reach out to a wider range of potential new members, offering the safer, more solid financial services and products that they are looking for. However, the public also demands convenience, and credit unions have not, historically, had the best locations or facilities There has never been a better time to emerge from the shadows and show the best face that your credit union has to offer. Place yourselves where additional potential members live, work and play.
The economy may be providing a buyer's market for real estate and construction over the next few years. It's no secret that real estate appreciation over the last several years reached the top of the bubble earlier in this decade. In a 2009 publication Real Estate Investment Quarterly: A Special Research Report, capitalization rates reached approximately 9.3% in 2001 compared to the current and more realistic 7.2%, according to New-York based Real Capital Analytics. This means that buildings and sites may be available at comparatively attractive, realistic prices in your area right now. You should be able to secure a great piece of real estate in an excellent location at a substantial discount from what we have seen in the past several years. Doing this now may prove to be a very smart investment over the long term. In this same report, an online survey of 467 property investors conducted jointly by National Real Estate Investor, Retail Traffic and Marcus & Millichap Real Estate Investment Services, revealed that "72% of the respondent investors are accumulating new capital in preparation for buying opportunities." This may indicate that real estate acquisition attractiveness may be increasing soon. In another intriguing statement, Grubb & Ellis Research says that "in 2009, sellers will be more willing to do whatever it takes to get their properties sold." This research suggest that now may be the right time to acquire or build a new, more convenient location for your credit union.
Another consideration favoring relocation or expansion is the current downward pressure on construction costs. Along with other business sectors, the construction industry is suffering from the lack of available financing and slower demand for new construction. These contractors who had built-up their equipment and personnel resources over the construction boom of the last decade are now starving for construction projects while their material suppliers are lowering prices to compete for scarce bids.
Combine these price declines with hungry bidders and you may find that your acquisition and building costs have dramatically, and attractively decreased to the lowest level in years, though these numbers are expected to start rising over the next year.
The case for relocating, altering or building a new branch location is strong. If your credit union asset values will bear the cost of a new or renovated facility in a well-positioned location, you may find that it would be a wise move to start now.
Hopefully, just-in-time, you will find a fantastic, well-positioned location that will offer your current and potential new members added convenience and a better image, reflecting the safe financial products and services that your credit union has to offer. These characteristics may increase your membership, improve your revenues and solidify your balance sheet.
John L. Shedd is a financial facility consultant and architect with R. W. Larson Associates, and can be reached at 716-487-0354 or
