Having a Starbucks location nearby is great for coffee drinkers. However, did you know the benefit it has for homeowners? The Starbucks effect adds value to help homeowners maximize their real estate investment.
While people can have differing opinions about Starbuck – see all of the mania surrounding their Christmas, I mean holiday cups – one thing is true: a nearby Starbucks is an asset to homeowners. Let’s look at three ways Starbucks stores affect residential real estate values.
Photo by Gavin Grant
Starbucks Effect #1 – Faster Home Value Appreciation
Between 1997 and 2013, home closer to the coffee shop increased in value by 96%, compared to 65% for all U.S. homes. That’s 31% more than that of all U.S. homes!
Boston saw the largest appreciation over this time where home values increased a whopping 171%. This was 45% more than all the homes in Boston.
The first Starbucks store in Pike Place Market Photo by John Anderson, used under CC-BY-SA 2.0
Starbucks Effect #2 – Half a Percent Spike in Nearby Home Values
A recent Harvard Business School study examined data from Yelp, the online business review platform, Zillow, and the United States Census data. An interesting trend was found. When a new Starbucks is introduced into a zip code, homes values increase by 0.5% within a year.
What isn’t completely clear is whether home prices are increasing due to the new Starbucks store openings or because Starbucks stores bring more affluent customers to the area. What is clear is that the opening of a new Starbucks store is a sign that a neighborhood could be changing, which brings us to the third Starbucks effect.
A Starbucks in Washington DC Photo by Elvert Barnes used under CC-BY-SA 2.0
Starbucks Effect #3 – A Bellwether of Gentrification
Related to the Harvard Business School study above, a new Starbucks is a bellwether of gentrification. In an area without any nearby Starbucks locations, when a new location is opened, it is a sign of home prices increasing and an overall change in demographics.
A savvy, long-term real estate investor will look for zip codes without any Starbuck (if any exist!) that will have a new Starbucks location open in the near future and buy a property there. Once a new location opens, within a year the home value is likely to increase at a faster rate. You would need to do your homework and find areas on the verge of gentrification where Starbucks may expand their presence.
Zillow CEO Spencer Rascoff and chief economist Stan Humphries wrote in their book “Zillow Talk” that a new Starbucks gives a sense to developers that the neighborhood is on the rise. I wonder if Spencer Rascoff will write in his next book about the Zestimate for his own home being off by 40%? Regardless, real estate investors should look at Starbucks locations to find future areas of gentrification. With gentrification – for better or worse – comes higher real estate values and that’s what every investor wants to see.
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