The ‘Starbucks Principle’ for Real Estate and Why You Should Use It

Posted on Oct 27 2016 - 4:52pm by Housecall
#7

An Unidentified man holding a cup of beverage

By Matt Metcalf

A few weeks ago, I met with clients to discuss their real estate needs and desires.

“We really want a home in an area that will have long-term appeal,” the couple said. “That’s important to us.”

I nodded. “Let’s go get a Starbucks,” I responded.

“What?” They asked, visibly confused. “Why?”

I smiled. “I’ll show you – trust me – but let’s go get a Starbucks and we will talk about the area.”

They conceded, and while it was a strange request from a real estate agent, it was my way of introducing them to what I’ve determined as the “Starbucks Principle.”

When most people seek to buy a home, one of the questions that usually – and should – be asked first is whether the home will have good long-term value and appreciation. Making a great decision when buying a home means looking at both the short-term and long-term potential of the area surrounding it. What is it like now and what will it look like in the future?

The Starbucks Principle is an easy way to help you judge the potential long-term value and desirability of the area you are considering because it basically states that if you see a new Starbucks being built – or a large expansion/remodel of an existing Starbucks – then that area is likely a good area to buy in. The Starbucks Principle says look for that all too infamous green logo (or a few), and you will likely know the value is good now and the potential for continued strength is probable as well.

So, why does a coffee shop have anything to do with your home value? Well, it really is a shortcut for research and data that you can use as a cheat sheet of sorts. Franchises like Starbucks have vast resources to dedicate to gathering information on demographics, population growth, disposable incomes and development, so they know more than the average person. Before a company this size dedicates massive resources and capital, they make sure they know everything they can about the surrounding population, businesses and long-term potential for growth.

Beyond their own in-company resources they also have large numbers of developers and commercial real estate brokers seeking out their business. To get them to buy or lease in a given location, there has to be a strong amount of data to support the sales and growth potential of the area. They utilize all those resources to make sure they put stores in valuable locations.

Understandably, as much of a dedicated following that Starbucks has, there are also those who dislike (maybe an understatement in some cases) the conglomerate that has become Starbucks in America. However, ever heard the phrase “hate the player, love the game”? While we can all understandably dislike the company, to decide not to take note of the power of the brand and its following could be costly. Starbucks will definitely make sure that the data for disposable income, population projections, business growth and other factors support a new or expanded store; but the addition of a store to an area can actually create growth around it as well. When other businesses see Starbucks adding a store, they notice and will frequently flock to the area, which, in turn, brings people to retail centers.

Buying a house based solely on the presence or expansion of a Starbucks certainly should not be your objective, but it can serve as a shortcut on research and a reinforcement of your and your agent’s knowledge about a neighborhood or community. Making the best home buying decision means buying for the long term and knowing that, relative to the rest of the real estate market, you are likely to have the most stable value and resale price in both a seller’s and buyer’s market. The Starbucks Principle can be one additional tool to use when home shopping to make a strong long-term decision as it serves as one more tool to help you determine potential stability surrounding your home…and hey, you can grab a coffee while you house hunt too!

Known as the “Mile High Home Pro,”  Matt Metcalf has been a successful Colorado real estate agent for over 20+ years.

Facebook Comments

7 Comments so far. Feel free to join this conversation.

  1. Mark Pfeifer November 2, 2016 at 10:06 am - Reply

    I agree that Starbucks has a great business model (one that they could actually sell more than coffee – whatever they wanted) and that they do market research before opening a new store. However, much more can be said for Whole Foods that has a larger infrastructure and, thus, most likely more research on the next hot spot.

    Now with that said, you also need to look at a couple factors:

    1. Timing – Are you keeping up with proposed new stores? If not, you could be too late as property values have already increased. Take West Colfax for example – a lot of new development but the prices have larger skyrocketed so are the deals still there.

    2. Environment – Need to consider if you want a neighborhood feel or a planned community feel. Take West Colfax Starbucks again – would you rather be there or in Jefferson Park with 2914 Coffee?

    Again, I agree that it can be considered but there is so much more to it. Every buyer is different and that is what makes the industry so fun.

    Just some additional 2 cents and thanks for the post!

    Mark

    • Jon Polstein November 10, 2016 at 2:06 pm - Reply

      Hi Mark,

      While I agree that Whole Foods might use a better qualification process for the entry/expansion into new markets there are only 462 locations. That is too small of a subset to find viable location. On the other hand Starbucks has just under 24,000 and therefore more potential to find in a broader market base.

      Really interesting article.

      – jon

  2. Tracy Bowman November 9, 2016 at 5:26 pm - Reply

    Very good article, Thanks.

  3. Sin-Yi Lambertson, ERA Yes R.E. November 9, 2016 at 6:12 pm - Reply

    What a business like Starbuck look for is foot traffic & location that promotes business, not necessarily the best feature for a buyer looking to buy a home to live in. I believe the best thing when counseling my buyers in trying to decide where their new home should be is to base it on their needs & their lifestyle preference.

  4. Andy November 16, 2016 at 3:11 pm - Reply

    I feel that by presenting this idea to buyers can backfire. For one, say they found their perfect home- it puts an idea in their head that if they aren’t in proximity of a Starbucks, this home is a bad move. It will then restrict them from searching other areas because now they are worried their new home won’t appreciate… all because it was not next to a Starbucks. Just a thought. What do you think?

    Thanks for the article was definitely a good read!

    • Matt November 19, 2016 at 9:47 pm - Reply

      I would never encourage someone to use that as the only criteria for value because as you pointed out there are often great areas that do not have starbucks (maybe it is a case of not yet). What Starbucks does look for is disposable income, job growth and other important factors that typically lead to a strong housing market. So like anything I would say it is just one of dozens of factors that a real estate professional can use to help give advice.

      Glad you enjoyed it.

  5. Annette LePique November 17, 2016 at 10:28 am - Reply

    In my neighborhood, we had a declining retail center where both anchors left years ago. One was replaced by Target, a huge game changer, and followed by two Starbucks, one inside Target, the other on the west side of the complex. So, I guess in that regard, we’ve made it. The other anchor store has been torn down.
    However, we sit in an area of a very good urban school district, as opposed to the other urban district, KCMO which is not accredited. Even if you don’t have kids, you don’t want to waste your tax dollars on a district that is not educating kids.
    Finally, with all the improvements at this older retail center, we got Trader Joe’s, and that’s the real game changer. It’s the only one in town, and literally people travel from all over the city to shop there. Stop by anytime! Annette

Leave A Response