Real Estate: The 'Starbucks Effect'

Living near a Starbucks coffee shop is a great perk for any coffee lover. A much bigger bonus is the fact that homes that are located closer to Starbucks tend to increase in value much more significantly than those that aren’t. It may seem surprising that Starbucks would be the key to gentrification, but the numbers back up the claim.


The “Starbucks Effect,” as described in the new book Zillow Talk, purports that between 1997 and 2014, homes near Starbucks appreciated in value by 96 percent, while homes that are not located near the coffee giant only saw a 65 percent increase in value. The largest increase during this timeframe was seen in Boston, where home values increased a staggering 171 percent when they were within a quarter-mile of a Starbucks. That’s 45 percentage points more than all other homes in the city.

The correlation between Starbucks and property values could have far-reaching effects when it comes to home buying. The iconic brand has grown into a $15 billion company with over 19,000 locations spread over 60 countries. Starbucks’ reach could have real implications for the housing market. Research has shown that the homes located within a quarter mile of a Starbucks appreciated more than those located between a quarter-mile to a half-mile away. Researchers have also studied similar chains to see if the effect of rising home values is not specific to Starbucks, but is related to coffee shops in general. While homes near Dunkin’ Donuts do appreciate faster than the nation’s housing as a whole, the effect is not nearly as pronounced as compared to homes near Starbucks.

While it’s clear that living near a Starbucks correlates with a significantly higher home value, it’s less clear what the causation is. Starbucks is well-versed in identifying up-and-coming locations, and their real estate analytics team has a keen eye towards finding communities on the rise. So the question remains, is Starbucks fueling the trend, or simply following higher home values.

Regardless of whether the “Starbucks Effect” is a matter of correlation or causation, there’s no denying the numbers. Potential homebuyers would be wise to buy a house that is located within a quarter-mile of a newly-opened Starbucks. You’ll be employing the extensive research that the company has already done to decide the next up-and-coming neighborhood. Further, when a new Starbucks opens in a neighborhood, other businesses are often likely to follow suit.

Gennady Barsky is the CFO of JetSmarter and Real Estate Mogul. Barsky is a lover of all things automobile and has a passion for Social Media.