The “Starbucks Effect” is Ending—Why Real Estate Values Near Closing Shops Could Suffer
Summary
Starbucks is closing underperforming stores, which could negatively impact the value of rental properties in affected areas, especially in urban markets. Hosts should pay attention to retail trends and the potential impact of store closures on neighborhood desirability and property values. Monitor local markets and consider the impact of retail changes when evaluating investment properties.
Key Insights
- •A 2022 survey by ATTOM found that homes near an ALDI experienced a 58% increase over five years, Trader Joe’s 49%, and Whole Foods a 45% increase.
- •Homes within a quarter-mile of a Starbucks increased in value by 96% between 1997 and 2014, compared to a 60% increase nationally during the same period.
- •Starbucks is closing 400 underperforming stores, potentially impacting property values in areas with a high density of closures, especially in urban cores.
- •A 2015 survey by Zillow found that neighborhoods with Dunkin’ Donuts experienced an 80% increase in property values.
Action Items
- ✓Landlords should look for cluster effects in their areas, tracking if retail closures are isolated or part of a broader trend.Effort: lowImpact: medium
- ✓Landlords should consider tenant replacement rates and how quickly vacant storefronts are filled with desirable tenants as an indicator of future property values.Effort: lowImpact: medium
- ✓Evaluate the movement of residential prices in areas affected by retail closures to understand the local market.Effort: mediumImpact: medium
Tools & Resources
- →Zillow: Zillow’s 2015 report
- →ATTOM: A 2022 survey by ATTOM
Watch Out For
- ⚠Landlords might make the mistake of not paying attention to retail trends, which affects desirability and property values.
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