Does Starbucks Drive Up Property Values? The Coffee Behemoth May Be Changing Up-And-Coming Neighborhoods
“Well, there goes the neighborhood,” sighed an acquaintance recently at the prospect of a Starbucks breaking ground near her place of work. While remarked in jest, that sentiment may actually carry some weight, according to new research suggesting that Starbucks drives up the property values in residential areas. And not just Starbucks, they say, but also America’s other preferred solo cup of java, Dunkin’ Donuts. So what does this mean when it comes to your rent? Starbucks is hip to your blooming neighborhoods early on, suggests the research, and Quartz contends that it has a direct impact on property values within a quarter mile any direction.
The data, reported by Quartz, was excerpted from a new book called Zillow Talk: The New Rules of Real Estate, which tackles topics like gentrification, property value, and market trends. And while it’s no secret that “upscale amenities” and commercial properties impact residential value, the Zillow Talk authors Spencer Rascoff and Stan Humphries were able to demonstrate that homes within a quarter mile of Starbucks increased in value by nearly 96 percent between 1997 and 2012. Dunkin’ trailed close behind, correlating with residential pricing increases of 80 percent.
Rascoff and Humphries “tracked values of homes in a very tight ring within a quarter mile of Starbucks (so close you could practically smell the dark roast from your front porch),” and then compared them with the market value of homes further away. They found that in a five year period of a Starbucks opening, housing within the quarter mile ring appreciated more than 21 percent, while homes outside the radius increased by under 17 percent.
“Whatever the reasons,” they write, “it seems pretty clear that people are paying a premium for homes near Starbucks. And furthermore, it looks like Starbucks itself is driving the increase in home values.”
However, when considering the fact that Starbucks has a whole team of analysts tracking the market value of commercial and residential spaces, and tracking traffic patterns and business ventures in potential venues, it may be worth noting that these neighborhoods were likely already boarding the Gentrification Express before Starbucks swooped in. Starbucks may be choosing locations that are seeing the increased traffic, business development, and rental prices of any up-and-coming area, rather than singlehandedly driving the escalations itself.
As other research has shown, those "upscale amenities" (e.g. coffee houses, theaters, shopping centers, etc.) certainly aid in making properties more attractive to prospective buyers. To that end, Starbucks is merely aiding the gentrification process (its presence perhaps encouraging other like business to move in next door), not necessary facilitating it. It may be about correlation here, not causation.
So what does this mean? Find yourself a crystal ball that predicts the property investment habits of a Starbucks before they happen, and then buy. Or, if you’re renting and the patron saint of gentrification heads to your hood? You know, run.
Head over to Quartz to read the full report.