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The Starbucks Effect: Anticipating Trends in Commercial Real Estate

Posted by Stu Waters on Oct 24, 2017 2:00:00 PM
Stu Waters
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Quartz Research did a study comparing data from Starbucks and Zillow to see if there was a  correlation. Sure enough, homes within 1/4 mile of a Starbucks showed a drastic increase in value when compared to home value listed on Zillow — an increase of 65 percent, in fact.

The Starbucks Effect: Anticipating Trends in Shopping Malls

That correlation was mind-boggling to many, and debates broke out immediately regarding correlation and causation: Does having a Starbucks within 1/4 mile of a property indicate that property values are going up (correlation), or does Starbucks cause property values to increase by placing a café in a neighborhood (causation)?

Regardless of the answer to that question, the correlation is very strong, and tracing the data back over several years shows that it holds true in all parts of the country. Property values near a Starbucks appreciate more quickly than those in other locations.

So what does this mean for commercial real estate? What does it mean to a shopping mall to attract a Starbucks as a client? To determine this, it's important to look at just what Starbucks does when choosing locations.

How Data Helps Starbucks Make Smart Choices

Starbucks ability to driving real estate prices isn’t by accident. The company employs about 20 analytics experts all over the world to help them assess possible real estate locations, and it also brings in regional teams to weigh in on every store's location and design.

Starbucks considers location choice to be a combination of art and science. The company's regional teams study traffic patterns, demographics, and local income trends. They look at existing businesses, economic trends, and other economic factors. Often, Starbucks is able to identify an up-and-coming location or the next hot neighborhood before they come to the attention of other experts the commercial real estate market.

The Starbucks Effect and Shopping Malls

Commercial real estate developers need data to make confident decisions and the Starbucks Effect provides one metric. Smart commercial real estate investors have learned that trusting Starbucks isn't enough. They have turned to other metrics like pedestrian traffic data offered by Motionloft's Sensors.

Whenever you see a Starbucks open, you know the company has given its seal of approval to the neighborhood or the shopping mall — an approval based on enormous amounts of vetting and research. As you research shopping malls and other commercial real estate options, keep your eye open for the local Starbucks — and enjoy a cup of coffee with your research.

Want to see how commercial real estate developers use pedestrian counts to make confident decisons?

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Tags: Retail, pedestrian Sensor

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