|
 Vanessa Pappas had another factor in mind as well: coffee shop
proximity.
When Pappas and partner C.C. Hirsch recently closed on a
three-bedroom property in Windsor Terrace, Brooklyn, it didn't hurt
that her favorite macchiato place was only a half-block away.
"Coffee is important," says Pappas, 36, global head of audience
development for YouTube. "It's our daily ritual, and we always go to
see our friends who work there. It makes us feel like part of the
neighborhood."
It turns out that easy access to quality java has broader
implications. Call it the Starbucks Effect: Proximity to a local
coffee shop has a very real, and positive, effect on home values,
new data shows.
"We looked for certain markers for where homes appreciated faster
than others," says Stan Humphries, chief economist at real estate
marketplace Zillow and co-author (with Chief Executive Spencer
Rascoff) of the book "The New Rules of Real Estate."
"Coffee houses emerged early on as a big predictor of future home
value. Within a quarter mile, close enough to smell the coffee
brewing, that ring appreciates faster than rings further out,"
Humphries says.
How much faster? Over 17 years tabulated by Zillow, leading up to
2014, homes adjacent to the local Starbucks almost doubled in value,
up by 96 percent. Those further out appreciated by 65 percent over
the same period.
And apparently not all coffee shops are created equal. Zillow
researchers compared homes near Starbucks locations to those near
Dunkin Donuts. Dunkin Donuts-adjacent properties also outperformed
the wider market, rising 80 percent over 17 years, but they lagged
those in the shadow of Starbucks.
Of course, there is a chicken-or-egg question here: Are coffee shops
causing a boost in home values, or are the popular chains merely
locating in promising neighborhoods that are already on the upswing?
Humphries' discovery: Within the first few years of opening,
Starbucks locations are actively helping local home values. After
that, the outperformance of the broader market tends to diminish.
WHOLE FOODS EFFECT
The coffee shop is hardly the only symbol of neighborhood
gentrification. Researchers have found other amenities can have an
even more powerful effect on home values.
Nearby specialty grocers, for instance, can lead to a 17.5 percent
home-price premium, according to Portland, Oregon-based real estate
consultancy Johnson Economics. That compares to a more modest 4.5
percent for coffee shops.
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In that sense the Starbucks Effect might be more accurately be
termed the Whole Foods Effect, according to the firm's principal,
Jerry Johnson, referring to the natural food supermarket chain.
Also significantly affecting nearby home prices, according to the
Johnson Economics study: cinemas, wine shops and garden stores.
Given Starbucks' massive resources, it is perhaps not surprising
that the Seattle-based chain is adept at picking out promising
spots. After all, the company employs entire teams of professionals
devoted to pinpointing optimal locations.
"Where we choose to locate our stores is as important as how we
design them," says Michael Malanga, Starbucks' senior vice president
of store development.
For potential homebuyers, it's like heading into an exam with the
answer key. Assuming that significant market research has gone into
every store opening, buyers can piggyback on those positive
conclusions.
"There are substantial resources spent by Starbucks headquarters to
figure this stuff out and find where the best locations are going to
be," says Zillow's Humphries. "So for homebuyers, you can
essentially draft off the work that Starbucks has already done for
you."
As for YouTube's Pappas, she's not a fan of Starbucks. She prefers
her local Brooklyn spot - Krupa Grocery. But she isn't surprised
that coffee shops turn out to be a reliable predictor of home-price
appreciation.
"Especially in New York City, you want to be able to walk to
everything," says Pappas. "Having a coffee shop within eyesight is a
big plus."
(Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance;
Editing by Lauren Young and Leslie Adler)
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