Chapter 24. Afterword. Health Food and Home Values (How They Organically Boost house prices)
Updated: Dec 19, 2021
I know you often shop at Trader Joe's and Whole Foods.
These shops are famous for quality cooking ingredients and higher-quality processed food products. Organic products are also popular. However, these stores are not only famous for their products. One of the reasons for their popularity in the real estate market is their accurate real estate analysis determining the location of the next store. As a result, it has a positive effect on the surrounding real estate, just like Starbucks, which I wrote about before, raising the prices of nearby houses.
So, what are the characteristics of the houses around Whole Foods or Trader Joe's?
Real Estate Near Whole Foods and Trader Joe's
Higher House Prices
A study of the prices of houses within a mile radius of stores of both brands from 1997 to 2014 showed that the prices of those houses far exceeded the average house price in the United States. In particular, since 2000, house prices have been maintained higher than the average price of the top 1/3 houses in neighboring large cities. Faster price increase
What's more, homes within a mile of both brands' stores will also rise in price much faster. As you can see in the table below, from 1997 to 2014, the average house price in the US increased by 71%. However, houses around Whole Foods and Trader Joe's have increased by 140%, almost doubling the difference.
Here, many people will think, "Anyway, those stores only exist in good neighborhoods. It's only natural for house prices to rise in those neighbors regardless of Whole Foods or Trader Joe’s." If so, how about comparing the price trends before and after the Whole Foods or Trader Joe's in the same house? Before & After
According to Zillow's analysis, Whole Foods and Trader Joe's are the obvious causes of rising house prices. The table above shows the rate of rising house prices within a mile of Whole Foods and Trader Joe's compared to the rate of rising house prices in the same city. In the case of Whole Foods, for example, 24 months before the opening of the store, the rate of increase in house prices around Whole Food was 2-3% lower than the average rate of increase in the same city. 15 months ago, it was about 7% lower. However, 6 months before Whole Foods was open, the gap decreased, and from the time the store opened, the price increase rate of houses around Whole Foods rose faster than the average of the same city (about 10% when the difference is the largest).
The neighborhoods around Trader Joe's show a similar phenomenon. Since the store opened, it always shows a higher rate of increase in house prices than the average rate of increase in the same city.
So, how do Trader Joe's or Whole Foods pick the next store location?
In the case of Whole Foods (like others), the company's real estate team selects the next store location. Now that the company is part of Amazon, it will analyze a larger amount of big data to determine its next location. However, the first thing they check when choosing a location is the level of education in the area. When selecting a pool of potential locations, the top priority requirement is that there are 200,000+ college graduates within 20 minutes of driving distance. In addition, it is said that various factors such as population density, demographics, and real estate prices are also taken into consideration.
Trader Joe's is no different. Founder Joe Coulombe said in an interview with the LA Times in 2011 that "All Trader Joe's were located near centers of learning" so much that he emphasized the level of education in the region. He said that the biggest reason he started a business in Pasadena was that there were many highly educated people in Pasadena. In particular, in the case of Trader Joe's, they say that they choose regions with a lot of high-educated people with low incomes. In other words, instead of choosing a place that is already good in that area, Trader Joe’s chooses a place that will become good in that area.
However, you will feel that there is something insufficient to explain the rapid rise in house prices just by opening these stores in an area where there are highly educated people. In fact, the opening of these stores creates a fun virtuous cycle around them. Seeing the green sign of Whole Foods, other brands are more confident and start opening stores around it. If you go to a nearby Whole Foods store, there are almost always other popular stores around. In the case of Whole Foods in our neighborhood, people's favorite stores like Dick's Sports, DSW Shoes, and Nordstrom Rack are next door to make the neighborhood more valuable and convenient.
If you want to discuss more this subject or need more information, please feel free to reach out to me.
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