Hundreds of bank branches are sprouting up in the nation's top 20 markets, leading to intense competition among financial institutions for prime street corners. That's driving demand and pushing up prices. But it's also raising a question among urban brokers: Will today's battle for walk-in banking traffic result in a glut of sublease space five years from now when the losers retreat from the field?

The growth has been swift and dramatic. And no bank has been more aggressive than Washington Mutual, which has opened more than 450 branches, including 28 in metro Chicago in June alone. The company expects to open another 250 outlets nationally before the end of the year. Bank of America is also spreading out. Last year, it announced a three-year, $2 billion effort to build 550 branches over three years.

In Manhattan, banks are dueling with retailers for prime space in office buildings. In one recent episode, a major retail chain was prepared to sign a lease for $175 per sq. ft for space on the upper west side, but at the eleventh hour the deal was knocked off the table when a bank made an offer for $200 per sq. ft.

“Every time a street corner becomes available or can be developed, you have an offer in from four different financial institutions, and it's a bidding war,” says Susan Kurland, executive director with Cushman & Wakefield, which represents Wachovia in its expansion program in New York. “At the end of the day, there is going to be an awful lot of bank branches in the city, and in five years there is going to be a lot of subleasing,” predicts Kurland.

What's driving the push to lease and build at such a feverish pace, especially in the age of Internet banking? Banks want to sell a full line of investment products — from mortgages to mutual funds — and that requires a personal touch, says Bruce Ficke, CEO of account management for Jones Lang LaSalle, which represents Bank of America in its massive expansion program. “These branches are viewed as their link to the customer.”

In Chicago, the battle for premium sites (with lots of well-heeled customers walking by) is intensifying. Bank of America plans to open 10 branches in the city this year. It's not unusual for three or four banks to be pursuing the same site, says Ficke. “It's a very focused search for good branch sites right now out in the marketplace.”

One counterbalancing force to expansion is consolidation. Wachovia Corp., for example, is still in the process of consolidating 150 branches following its merger with First Union nearly two years ago. In April, American Financial Realty Trust, a real estate investment trust, acquired 87 surplus properties from Wachovia. The 72 bank branches and 15 office buildings totaled 1.1 million sq. ft.