Sometimes, all I can do is shake my head.
Did you hear about the report released by Quartz a while back that came to the conclusion that “Home values rise when a Starbucks location hits the neighborhood”?
While, I agree there is a correlation, I would politely disagree there is a causation between the two.
According to data provided by Zillow, it shows that American homes located near a Starbucks appreciated 96 percent from 1997 to 2014, from an average of $137,000 to $269,000. That is compared to homes in neighborhoods without a Starbucks who appreciated an average of 65 percent during that same time from $102,000 to $168,000.
Common sense wants to jump in and say… wait a second mister…. you just twisted that around.
MY FIRST POINT.
Let’s look at the starting price point of homes in this study. The “Starbucks” group is $137,000 and the “No Starbucks” group is $102,000 on average.
Before the study starts, we see that caffeinated group starts off 34% higher than the non-caffeinated group. If the home prices are higher in an area, then the income to support those home prices owned by the people is also likely higher.
Starbucks isn’t a cheap habit. It is likely a higher income household that supports the “cup or two a day” consumer who may be the basis of their operations. You follow me?
SECOND POINT.
Supply and Demand. Starbucks has a model when they bring in a store. For an example (this is imaginary), let’s say they need 5,000 people in a 10 minute drive to support a location. If that was their model, they would then place their stores in more populated areas to begin with.
Similarly, maybe they need a certain numbers of cars to drive down the road to support their store. That would also indicate there are more bodies in an area.
Either way, what happens when more people live in one spot? A higher demand for housing. You can probably guess the rest… with the higher housing demand comes increased prices, and so on.
THIRD POINT.
Starbucks is pretty smart. I would imagine that in addition to watching the existin
g trends and demographics in a location, they are also smart enough to watch where the path of progress is headed and predict their next success.
Is there a new mall being developed? More neighborhoods being built? Increased shopping or population would indicate more needs and spending. Hence… another Starbucks on the corner.
When our dollar gets stronger, it means that real estate just got more expensive for everyone on the outside of the border looking in.
This is NOT a discussion on whether you want international investment or not. Fact is we have numerous properties purchased and owned by those from outside of the United States. It is how our world goes round.
In a survey done early this year by the Association of Foreign Investors in Real Estate, a trade association with members from 21 nations, Seattle ranked 5th among the best US cities for investment. New York, Los Angeles, San Francisco, and Washington D.C. topped the list. Boston and Seattle tied.
Last year a Hong Kong based group Gaw Capital Partners bought the Northwest’s tallest skyscraper… you know, the Columbia Tower downtown?… for $711 million.
Germany’s largest real-estate fund managers paid $299 million for an office complex developed for and leased to Amazon.
THE TAKE AWAY.
Is Starbucks or Trader Joe’s or Brand X causing home values to increase faster? No. They just know how to watch the market and plan ahead to take advantage of the future opportunities.
We should implement that philosophy when we can. Where is the market shifting? What will be the next opportunity? Try to find the best location to support your business. When I represent my clients who are small business owners, I think about those things. I want them to be successful.
Sometimes all it takes is to start asking questions. Who is the customer for your business? Where are they coming from? How far are they willing to drive? What is the general demographic make-up of that customer, so you can focus on where they live or work or maybe will move to? Simple questions, but typically very difficult to answer directly.
That’s where the value of having an expert comes in. Think you might need some help? You can find me any day except Sunday. Call/text (206) 293-1005 or email: Jen@HudsonCREG.com.