What a Starbucks Does to the Neighborhood

Zillow's bigwigs crunch the data
By Kate Seamons,  Newser Staff
Posted Jan 29, 2015 1:48 PM CST
Customers enter a Starbucks coffee shop in Arlington, Mass.   (AP Photo/Elise Amendola, file)

(Newser) – It seems like an expected enough conclusion: A Starbucks is good for the neighborhood. But just how good? Zillow CEO Spencer Rascoff and Chief Economist Stan Humphries dig into the question by syncing their own real-estate data with known Starbucks locations. What they conclude: "Starbucks equates with venti-sized home-value appreciation." And Starbucks isn't chasing the higher home values—it seems to be creating them. In an excerpt from Zillow Talk: The New Rules of Real Estate running on Quartz, they acknowledge that the locations where Starbucks sets up shop are typically higher value ones. But consider the effect on appreciation. Three ways they analyzed the data:

  • "A home that is now [within a quarter-mile of] a Starbucks would have sold, on average, for $137,000 [in 1997]. A home that is not near a Starbucks would have sold, on average, for $102,000. Fast-forward 17 years to 2014. That average American home has now appreciated 65%, to $168,000. But the Starbucks-adjacent property has far outpaced that, appreciating 96% to $269,000."
  • To verify there was indeed a "Starbucks Effect" happening, they also looked at homes within the same distance from a Dunkin' Donuts. Those near the latter still enjoyed appreciation above the norm since 1997, but at 80%.
  • To try to verify that the "Starbucks Effect" really took place after the opening (rather than already being present), it looked at homes within a 1/4-mile and 1/2-mile ring of a Starbucks location in the five years after the store opened. Those in the closest ring appreciated about 21%, to the outer ring's 17%.
Besides buying near a Starbucks, what other insights does Rascoff offer? From the New York Post: Undertake a mid-range bathroom remodel, not a kitchen remodel, to get a better return on investment; avoid the words "unique" or "potential" in your real estate listing; and street name suffixes like "Way" and "Sunset" correspond to higher home values than "Street." (If you enjoy a nice Starbucks Frappuccino, you may want to thank Kenny G.)

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