Are Bank Branches Still Worth Investing In?

The rise of online banking has triggered a dramatic shift in the way Australians access banking services. Since 2017, over 2,000 bank branches have been closed across the country, with around 800 of those in rural and remote locations. A further 450 regional branches remain at risk, prompting scrutiny from federal politicians. For those few branches that remain, the lease profiles are becoming less attractive to investors, with standard lease terms now closer to three years, down from 10 just a few years ago. In this article, we examine the scale of this trend and whether there is still a case for investing in bank-tenanted commercial property.

Investment Yields: A Brief History

Bank branches were historically regarded as premium commercial property assets. Long lease terms (often 10+10+10), blue-chip tenants, and prime locations saw yields regularly trade in the 4.0%–6.0% range, depending on location and lease tail. These assets were tightly held and highly sought after.

Fast forward to today, and the picture has changed significantly.

A CBA branch in Forbes, NSW sold for $645,000 in November 2024, with a net income of $53,152 — reflecting a net yield of 8.2%. The lease: a modest 2+2-year term with 3.0% annual increases. Forbes, with a population of ~9,300, has been slowly declining at -0.33% p.a. over the past decade.

Interestingly, this was still a capital gain compared to the prior sale in 2018 at $416,000 (yielding 10.5% at the time on a 3+2+2+2 lease structure). Assuming no major capital works, this equates to a 19.3% p.a. total return over six years — not a bad result for a riskier lease covenant.

Similarly, a Westpac branch in Casino, NSW (population ~10,900, declining -0.50% p.a.) sold in December 2024 for $875,000 on a 3+3+3 lease at 3.0% annual increases, reflecting an 8.0% yield. While well located near Coles and Woolworths, the softer result highlights the growing investor hesitation towards banking covenants.

The Branch Exodus

According to Canstar, 230 bank branches and 217 ATMs were closed across Australia in the past 12 months alone. Over a seven-year horizon, the numbers are staggering:

• 2,334 bank branches closed (avg. 333/year)

• 8,338 ATMs removed (avg. 1,191/year)

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As journalist Jackson Ryan put it, “A third of branches have closed in the past five years, while the number of ATMs has been slashed by more than half.”

Put differently, Australia's combined bank branch and ATM network has halved, from 19,508 in 2017 to just 8,836 in mid-2024.

What’s driving this trend? Profitability is a clear driver — maintaining a physical network is expensive compared to digital infrastructure. But the rapid decline in ATM numbers raises questions. Is this simply a cost-cutting measure, or part of a broader shift away from physical cash access? If so, who benefits — and at what cost to regional communities and investors?

Correlations & Community Impact

Branch closures mirror the rise of online banking, but not all customers are ready or able to adapt. Older Australians, in particular, often struggle with digital platforms, security concerns, and app or system outages. In some cases, regional customers have been left without access to their funds for days.

Of the 230 closures in the past year:

• Westpac: 66

• NAB: 53

• ANZ: 39

• CBA: 32

  
  

Regional closures have slowed, however, down from 112 to 52 year-on-year — likely due to the February 2023 Regional Banking Inquiry. In response, ANZ and Westpac suspended closures, while CBA paused until 2026. That said, CBA still shut down 45 Bankwest branches in WA in 2024 as it transitions to a digital-only platform.

Looking ahead, more closures appear inevitable. Research from AreaSearch in 2023 identified 454 regional bank branches at risk, largely due to small population bases (<2,500). Even more alarmingly, at least 11 towns with populations over 10,000 have no bank access within 5km.

The Knock-On Effects: Armaguard’s Decline

The rapid contraction of cash-handling infrastructure has had downstream impacts. Armaguard, a key provider of cash logistics, faced major financial strain due to the fall in branch and ATM demand. In June 2024, it received a $50 million bailout from major banks after agreeing to more transparent pricing.

Notably, the ACCC had previously allowed Armaguard’s acquisition of competitor Prosegur in 2023, contingent on maintaining low fee structures — arguably an unsustainable condition that further strained the business.

Federal Intervention on the Table

In response to mounting pressure, the Federal Government is exploring a new banking levy, designed to incentivise banks to maintain regional branches. Under the scheme, proceeds would be redistributed based on each bank’s regional footprint, rewarding those who retain services and penalising those who don’t.

CONCLUSION

Bank-tenanted commercial property assets are no longer the low-risk property investment they once were. With shorter lease terms, shrinking physical networks, and shifting bank strategies, investors must tread carefully. In today’s market, acquiring a bank branch may still make sense for a small handful of investors, but only with a robust risk-adjusted yield and a clear exit strategy in mind.

If you're unsure which path is right for you, our expert team can guide you through tailored property strategies. Book a free consultation to discuss more