Think of a neighborhood that had a Trader Joe’s open recently, or a lot of upscale fast casual chains set up shop, or a new Starbucks open up. Are home values in that neighborhood going up?
If you answered yes, it’s probably not a coincidence. In fact, studies show that some companies are really good at opening locations in markets that become even more well-suited for their business over time. High profile examples include Whole Foods, Trader Joes, and Starbucks. And these changes aren’t small - a Zillow analysis found that between 1997 and 2014, homes near a Trader Joes or Whole Foods appreciated at about 2x the national average. Most importantly, the rate of appreciation accelerated after a new location opened. In other words, a Trader Joes or Whole Foods opening up in a neighborhood is a leading indicator of outsized growth in nearby home valuations.
But what’s going on? As noted in a previous post on how store locations can be used as granular tracers of what’s around, a company’s store locations reflect its overall site selection strategy. The chains mentioned above are able to accurately predict the growth of their relatively affluent customer base when selecting sites.
A new location opening is also a relatively rare event - TJs and Whole foods typically open just a handful of new locations each year. Even Starbucks, a chain with a much larger number of locations (more than TJs and Whole Foods combined, many times over), will only open at most a small number of locations in any given area each year. For example, here are all the areas in Portland, OR, that have a Starbucks within walking distance:
Now, here’s a map showing just areas that are walking distance from a Starbucks that has opened in the past year:
If you are a homebuyer looking at Portland, and you'd like to purchase a home that will likely appreciate at above the market average, look to these areas. In general, the ability of certain chains to accurately predict future changes around sites they select, and the relative rarity of new locations opening, means buyers or investors should take note of where the newest Trader Joe’s, Whole Foods, or Starbucks are.
But how can you take advantage of these signals? At Iggy, we’ve just introduced a new type of a feature that measures what's opened nearby in the past year. We’ve applied the methodology across many of our existing POI features, like upscale fast casual restaurant chains or grocery stores. And yes, Trader Joe’s, Starbucks, and Whole Foods are included too!
A company’s store locations reflect its overall site selection strategy. If your strategy is similar, look to them.
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