When Citizens Bank of Edmond in Oklahoma consolidated offices a year ago, Chief Executive Jill Castilla wasn’t quite ready to sell the excess space — but she had an idea.

Inspired by her recent visits to some Silicon Valley offices and the Barclays fintech accelerator in New York, Castilla had her staff transform the vacated office into a 12,000-square-foot entrepreneurial center called Vault 405. Her hope is to provide about 200 small businesses shared work space and resources at affordable prices, fueling the local economy and customer relationships at the same time.

“We see this as an extension of the bank, providing a fertile ground for small-business growth,” said Castilla, whose $252 million-asset bank is in a historic suburb of Oklahoma City.

So-called co-working locations are popping up in cities around the country for entrepreneurs and small-business owners not yet in need of their own offices. Now some banks, especially those with extra real estate on their hands as a result of consolidation, are stepping into the co-working business to appeal to innovative, fledgling companies that perhaps could become the next tech giants.

More banks are subletting or creating shared spaces for nonfinancial purposes because digital banking reduces the need for large branches, said Kenneth Thomas, a bank consultant and president of Community Development Fund Advisors. Leasing excess space becomes an additional source of cash flow for the bank, he said.

Co-working location at a Silicon Valley Bank office in San Francisco.
Strategic spaces
Silicon Valley Bank uses co-working locations to find business clients. Its offices, including this one in San Francisco, are also designed to appeal to innovative companies by offering collaborative spaces and incorporating their products.

Some banks recruit coffee shops or other financial firms to lease their space, while other companies focus on entrepreneurial clients.

Lead Bank in Garden City, Mo., built a branch in Kansas City in 2015 designed to appeal to local tech entrepreneurs. The $210 million-asset bank provides free office space to two startups each year as part of a local entrepreneurial grant program.

The branch has free Wi-Fi, coffee, conference rooms and a rooftop space with views of downtown available to clients.

“We are truly trying to put our money where our mouth is when we say we support small businesses and entrepreneurs in Kansas City by giving them a great location and office space,” said Melissa Beltrame, Lead Bank’s director of marketing.

Local nonprofit organizations also use the space for fundraising events. Other community members and bank clients can rent the rooftop space for networking or other corporate events on a Friday or Saturday night for $3,000. That rent is another stream of revenue for the bank.

Beltrame said it’s hard to say how many accounts the bank has acquired because of the community-oriented space. However, the new space has helped the bank with brand recognition and loyalty, she said.

“We think this is the way banking needs to be done in the future,” Beltrame said. “It’s all about relationships.”

Marla Lance (right), community manager for Vault 405, stands with Heather Jack from Fast Signs, a local small business that makes signs and banners. Citizens Bank of Edmond opened Vault 405 in a former bank office to offer co-working options to local small-business owners.
Building rapport
Marla Lance (right), community manager for Citizens Bank of Edmond's Vault 405, stands with Heather Jack from Fast Signs, a local small business that makes signs and banners. The bank opened Vault 405 in real estate it had vacated to offer co-working options to local small-business owners.

Sometimes banks can be the tenant of a co-working facility.

Silicon Valley Bank in Santa Clara, Calif., as part of its growth strategy, uses 11 co-working spaces leased by WeWork and other private firms to study new markets or seek out client prospects.

The bank rents chairs and co-working space in a new market before committing to an office lease. It also uses co-working spaces to recruit top talent in markets where Silicon Valley Bank does not yet have a presence, said Jody Brown, the bank’s real estate director.

Beyond that, the $49.8 billion-asset unit of SVB Financial will rent co-working space in markets such as Boston and San Francisco, where it already has its own offices, to reach entrepreneurs and promising upstarts.

“That’s where our clients are and where innovation is happening,” Brown said. “We want to have a finger on the pulse of who emerging potential clients are.”

Moreover, Silicon Valley Bank designs its offices to appeal to innovative companies by offering collaborative spaces and incorporating clients’ products such as smart water coolers and seating-reservation software.

In all these instances, bankers repeatedly emphasized that they are taking the long view.

At Citizens Bank of Edmond, depending on the accounts the customer has with the bank, upstarts could receive free or discounted rates, Castilla said. For now, the bank is charging between $400 and $1,000 per month for office space and $175 to $275 for desk or shared space. Day passes are also available.

Castilla said the bank plans to break even on its investment. She hopes a few years down the road Vault 405 will have a wall of success stories from current and former members. Citizens Bank of Edmond also plans to bring a local grocer into Vault 405 later this year.

“We are really trying to do this to establish stronger relationships with small businesses,” Castilla said.