Why it’s Time to Do Things Differently
Commercial real estate brokers serve banks and credit unions exactly alike. But they’re not. Credit unions are different which means the service criteria should differ, as well.
Search the ‘net for “How do banks decide where to locate?” Do it and you’ll immediately be presented with numerous links specifically related to that question.
Next, search for “How do credit unions decide where to locate?” Do this and what you’ll get is the Internet equivalent of crickets. Specifically, link after link about how to find a credit union. How to join a credit union. How credit unions differ from banks. What you won’t find is information related to credit unions and their branch and headquarters real estate location needs, strategies, or best practices. The reason is two-fold.
First, credit unions executives are generally busy making important decisions rather than spending time writing articles about them. And second, real estate brokers — and those in the real estate industry at-large — who might post such things generally think that banks and credit unions are different names for the same thing and therefore cannot articulate the difference. Of course there are major differences, but the fact that brokers don’t know this is a problem for credit union leaders and their boards.
For most banks, real estate decision-making is a numbers game. They tend to follow the money, focusing on areas with the most and typically avoiding those outside this stratum, especially in LMI areas. This makes the search for where to locate a branch fairly simple. The brokers they engage then count households, shopping centers, factor in basic income data and search for expiring leases. If any branches should fail, the net result for most large retail banks is essentially a rounding error.
For credit unions, the stakes are far higher. Make the wrong choice on a new branch location or headquarters and the result can be catastrophic. Which is exactly why decision-making criteria for credit unions should be fundamentally different.
Recognizing this, we don’t start by counting households. In fact, we don’t even start with real estate. Instead, we begin by understanding our credit union clients’ long term vision. Yes, we are highly interested in their business today, but in effort to truly optimize their future investments, we need to understand what they see as their ideal membership three, five and even ten years down the road.
We want to know how their market is changing. What kind of industries and employers are investing in their region? Where are homebuilders drafting EIR’s? Where are new schools and colleges being built and how do those institutions rank? Where are retail developers and medical centers seeking entitlements? What is the status of municipal bonds and public works projects?
The answer to these questions (and many more) are guides to the future: A data-driven blueprint of who their “ideal members” are going to be and where they will work, reside and most importantly shop. (Which, post-Covid, may very well continue to be one-in-the-same-place).
It’s a People Thing
As a result, rather than starting with real estate, our process begins with people. With in-depth conversations about members and employees – both current and future. Based on what we learn, we apply predictive analytics tools that enable us to deliver a picture of the future for any market. One that ultimately enables our clients to make informed, defendable and sustainable real estate decisions.
For example, take a multi-generational agricultural market that is slowly but surely evolving toward residential and commercial. The region is now on your radar screen for expansion. Developable land is plentiful and affordable, the local school district is well-rated and the region is less than an hour from a dynamic and diverse urban center. You’re interested in planting your flag, but the market’s current characteristics don’t exactly fit your original charter and membership parameters. Not surprisingly, local brokers think the time is right to sign a long-term ground lease or, better yet, buy some land. In other words, “Let’s Make a Deal!”
Maybe. Maybe not.
On the strength of your current “knowns,” we would undertake the steps necessary to mine for deeper metrics, such as:
- How closely does the current population measure up to your “ideal future member” and employee profile?
- What is the projected growth of your ideal membership and the best qualified employees?
- By 2026, what is the anticipated income and rate of employment among skilled blue collar and emerging white-collar demographics?
- What are the most important factors for ideal members to relocate from major markets to emerging markets?
- What percentage of new residents are likely to purchase a home? And in what time frame?
- What percentage of ideal members are likely to fund education accounts or need loans for minivans to transport their growing families in the meantime?
As you see, these questions don’t deal with retail pads and parking ratios. Rather, they’re focused on people: A number of which don’t yet reside in the market. Many of which have yet to enter the labor force. But they will reside here and when they do, they are going to be looking for financial institutions that understand them and offer the kind of services – both online and face-to-face – to assist in their most important personal and professional financial matters.
Their top financial priority will not be geographical convenience – that attribute will be nice but farther down the priority ladder. What they will care most about is how your acumen, insights and offerings sync with their existential financial needs. In short, will you be just another “bank”, or a trusted ally capable of assisting them through every major financial life decision?
We get that our process is different. It makes us what I like to call, “supportive contrarians.” Strategic partners who — rather than simply nod yes and seek to land a commission as quickly as possible — take the time to fully explore the road less traveled. The road that will be the gateway to the future you confidently envision, as opposed to the one others settle for.
Corey A. Waite is a leading commercial real estate advisor to the financial services industry. As Founder and CEO of Rubicon Concierge Real Estate Services, Corey works directly with senior executives coast-to-coast to deliver strategic plans and transactional services focused on optimizing the needs of employees, clients and members.
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