Hundreds of Starbucks coffee shops are closing in the US, and this could affect housing prices across the country, Realtor.com reports, writes UNN.
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Starbucks, an integral part of many communities, is closing hundreds of coffee shops across the US, and no neighborhood is immune to the reduction in the number of coffee shops – both in suburbs and in metropolitan areas.
The coffee giant says the plan is to close coffee shops that are financially inefficient or unable to provide the level of service customers are accustomed to.
"As we've reviewed, we've identified stores where we cannot create the physical environment our customers and partners expect, or where we don't see a path to achieving financial results, and those stores will be closed," said Brian Niccol, chairman of the board and CEO of Starbucks, in a recent press release.
Starbucks is traditionally located in bustling areas. And given that in some places the price of a grande latte is approaching $6, one can expect Starbucks to appear in middle and upper-middle class neighborhoods, the publication notes.
Todd Droulette, a real estate expert who was once Starbucks' youngest exclusive broker for new locations and now represents a large Dunkin' Donuts franchisee in New York, agrees. "People evaluate the full range of services in a neighborhood. Proximity to infrastructure increases attractiveness. Today, everyone wants convenience," Droulette said.
The departure of a major brand like Starbucks can trigger a chain reaction in the local real estate market
The opening of a new Starbucks has long been associated with the "Starbucks effect" - a term used to describe how the brand's presence often signals growing prosperity and attractiveness of an area.
"The presence of a cafe can increase the attractiveness of an area, along with other factors that initially convinced the company to open that establishment," explains Hannah Jones, senior economic research analyst.
"In other words, Starbucks does not contribute to housing value growth on its own; instead, it tends to open coffee shops in areas where other factors, such as economic growth, increasing demand, and rising property values, are already at play," she noted.
Jones believes that closures could change this perception, signaling a decline in foot traffic or consumer demand.
Droulette adds that while a single closure may not cause long-term damage, multiple closures could initiate a negative trend.
"If it starts a downward spiral of two or more (points), it will negatively affect the value of surrounding real estate," Droulette noted.
A 2019 Emerald Insight study examined the impact of Starbucks on local real estate markets in Manhattan, New York, USA. Researchers found a statistically significant positive correlation between Starbucks locations and rents for nearby offices.
Using detailed multi-year data, including job density, WalkScore index, transportation accessibility, and Starbucks brand recognition, researchers found that commercial property rents near Starbucks locations increased. However, the link between Starbucks and residential rents was weak, with only a modest 2.3% increase and a statistical significance level of only 10%.
This suggests that while Starbucks can enhance the attractiveness of a commercial area, it does not necessarily directly impact residential property values. Rather, its presence may reflect and amplify broader economic and demographic trends already underway.
Starbucks closures may not lead to an immediate decline in property values, but they can signal weakening demand, reduced pedestrian accessibility, and changing dynamics of an area, especially if they are located in key commercial corridors, the publication notes.