Sunday, February 1, 2015

Starbucks Knows the Next Hot Neighborhood Before Everybody Else Does

Spencer Rascoff, CEO, Zillow and Stan Humphries, Chief economist, Zillow, write:
Although some may scoff that the predictive value of a given retail chain doesn’t mean much, locations near Starbucks are, indisputably, highly lucrative.

True, properties near Starbucks locations tend to start out more expensive. But as you can see, these properties appreciate at a faster rate than US housing on the whole. Interestingly, they’re also recovering much more quickly from the housing bust.

What does that look like in practice? Let’s look at the historical home value appreciation of areas that now are located within a quarter mile of a Starbucks. A home that is now near a Starbucks would have sold, on average, for $137,000. 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.
Note: Empirical correlation does not prove economic theories. BUT, they can provide interesting insights to think about.   -RW 

1 comment:

  1. Or, Starbucks nearly places its shops in areas which benefit (boom) first and foremost from bubbles resulting from Federal Reserve money printing, such as cities and financial centers. There are far more Starbucks locations in metro areas, and far fewer in rural ones. This is probably due to the fact that Starbucks coffee is more expensive and therefore frequented my the affluent, many of whom work (and live) in the city and financial centers specifically. However this doesn't imply that they've predicted that a neighborhood is going to become more affluent.

    Note: I live in Boston, whose Finance and Tech industries majorly benefit from Fed printing, and got my bachelors in Economics and masters in Predictive Analytics