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How Starbucks and Trader Joe’s Are Drawing in Homebuyers

March 7, 2016 | By

Worried that you’ll need to plant some color out front this spring to boost the allure of your listing? Your time might be better spent telling prospective buyers the home’s less than one minute from Starbucks.

According to Zillow, their analysis of home value data and Starbucks locations confirms that buying (or selling) a home near a Starbucks has benefits beyond easy access to your smoked butterscotch latte.

Between 1997 and 2014, homes within a quarter mile of a Starbucks increased in value by 96 percent, on average, compared with 65 percent for all U.S. homes, based on a comparison of Zillow Home Value Index data with a database of Starbucks locations, says Zillow.

In fact, according to Zillow, a follow-up study shows that home values grow more rapidly when a home is close to a specialty grocery store such as Trader Joe’s or Whole Foods. Between 1997 and 2014, homes near the two grocery chains were consistently worth more than the median U.S. home. By the end of 2014, homes within a mile of either store were worth more than twice as much as the median home in the rest of the country.

Similar to a Starbucks analysis, “the stores have become an amenity in their own right — a signal to the homebuying public that the neighborhood they’re located in is desirable, perhaps up-and-coming, and definitely improving,” says Zillow Group Chief Economist Stan Humphries, who with Zillow Group CEO Spencer Rascoff co-authored Zillow Talk: Rewriting the Rules of Real Estate, which was released in paperback in January with a bonus chapter about the grocery store phenomenon.

“Like a self-fulfilling prophecy, the stores may actually drive home prices,” Humphries says in the news release. “Even if they open in neighborhoods where home prices have lagged those in the wider city, they start to outperform the city overall once the stores arrive.”

The biggest “Starbucks effect” on home values was in Boston, which is coincidentally located in Dunkin’ Donuts’ territory. Homes there appreciated 171 percent, or 45 percent more than homes in the city during that time period. Dunkin’ Donuts also affected home prices, but on a much smaller scale. Those within a quarter mile of a Dunkin’ Donuts saw an increase of 80 percent between 1997 and 2013.

Heather Furfari, a Remax real estate agent in the metro west area, says Bostonians “love the Pats, the Sox, and their Dunkin’ Donuts,” but she can see the charm that the coffee shops such as Starbucks and Trader Joe’s have on potential buyers.

“When I take buyers out they do ask me where the closest Target is (which has a Starbucks in it), and the Trader Joe’s is a huge addition to Foxborough,” she says.

But “upscale retail stores tend to be in more affluent communities, and that’s where the resale values are higher,” Furfari says.

Buying Power

Demographics are hugely important for retailers, says David Fazio, who represents tenants such as Bed Bath & Beyond, Nordstrom Rack, PetSmart, and Famous Footwear in their searches for retail space.

“Retailers are very much a herd mentality and will follow the residential,” says Fazio, senior vice president at The Retail Connection, a commercial real estate agency in Dallas. “Trader Joe’s and Whole Foods have fewer stores so it’s more important to get this right. Many cities and residential developers want this type of retail because it’s such an amenity.”

Real Estate Agent Cassandra Stahl ran the numbers a year before and after a new Trader Joe’s opened in 2012 in Plano, a suburb north of Dallas. She found that sales prices increased 5.58 percent during that period, while the general West Plano area appreciated 5.56 percent.

“Contrary to the Zillow findings, there was no significant increase in the area analyzed,” says Stahl, who works at Covenant Realty Corp. in Dallas. “That being said, these stores are built in some of the most desirable housing areas. Since Texas is a nondisclosure state, Zillow would not have access to our actual sales prices on homes.”

Trader Joe’s locations are “focused in areas where people have access to good education, and many amenities in the area such as other desirable stores,” she says. “That may increase traffic into the area, which then could potentially encourage people to want to live near those stores. However, it doesn’t appear to drive up the prices of the homes in the area significantly over the growth already seen in the area.”

Zillow’s Rascoff reinforces that notion, saying “the grocery store phenomenon is about more than groceries.”

“It says something about the way people want to live — in the type of neighborhood favored by the generations buying homes now. Today’s homebuyers seek things in neighborhoods that weren’t even in real estate agents’ vocabularies a generation ago: walkability, community, new urbanism — and maybe we should add words like sustainable seafood and organic pears.”

Karen Nielsen is a freelance business writer in Dallas.

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