The Starbucks Effect
The “Starbucks Effect” may sound like a medical term related to caffeinated beverage addiction, but you won’t find the term in the Canadian Medical Association Journal. Rather, several articles have taken this parlance to describe the phenomena of how a Starbucks store opening increases home and property values.
Can the entry of a hip coffee shop predict housing prices? It’s something a lot of people talk about…
For those who don’t already know, The ‘Starbucks Effect’ theory says that the mere presence of the distinctive green Starbucks sign is enough to guarantee your local property values will be going UP! They would argue that the over-roasted coffee beans can foretell the future. That they are infallible when it comes to predicting neigbourhood ‘gentrification’. Others would simply say that Starbucks does its homework. They pick locations because the neighbourhoods are already up-and-coming. That their location analysts look at the Official Plan for Toronto Real Estate and see where there are development opportunities for intensification and population growth. Overlay a traffic-study and some demographic research for your target market and ‘voila’, you have a winning location.
Starbucks offers an amenity that up-and-coming neighbourhoods want – and it may even help define these neighbourhoods – but it is not the cause of an area becoming the newest “hot” place to live.
Most savvy real estate investors or developers would agree that the evolution of a neighbourhood is one that occurs over many years. It also involves a multitude of factors that include such things as population, employment and wage growth, infrastructure improvements and land and housing development. One way to foresee an increase in such factors is the arrival of large retailers; these organizations think long and hard before opening a new store and select locations in a meticulous fashion based on data, research and demographic information.
Retailers and builders that are going to be developing in that neighbourhood have most definitely already done their market research to make sure it’s worth their while before moving forward with an investment. Moreover, not only does Starbucks moving into an area show the winds of change, but also art shops and galleries opening, Pride flags and the LGBTQ community making its footprint on the main hubs, students looking for the new affordable place in town, and more.