Study Finds Impact of Starbucks on Nearby Home Prices
The appearance of a new Starbucks in a neighborhood has long been considered an indication of gentrification. However, a Harvard Business School study confirms the impact of Starbucks in real numbers: a half percent spike per year in nearby home prices.
Researchers looked at the volume of Yelp reviews for various businesses, namely upscale coffee shops, and compared them with data from the Census Bureau, Zillow and other sources. The analysis uncovered a consistent effect.
“If a new coffee shop goes into a zip code, this predicts housing prices go up 0.5 percent in a year,” said Michael Luca, economics professor at Harvard Business School and co-author of the study.
The study also found the “Starbucks effect” on home prices increases the closer a property is located to the chain. Home prices go up even more when there are businesses nearby with a lot of reviews. For every ten extra reviews a business received on Yelp, home prices in that ZIP code rose by 1.4 percent.
While a half percent bump in home prices might seem insignificant, it adds up when considering the already stratospheric real estate prices in cities like New York, N.Y., Los Angeles, Calif., and San Francisco, Calif. However, Starbucks itself might not be the reason for the home price increases. Instead researchers believe the coffee shop location scouts are simply better at identifying gentrifying neighborhoods than average homebuyers.
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