Study: Trader Joe’s boosts home values

According to a new study, homes near a Trader’s Joe’s increase in value as much as 40 percent.

By comparison, homes near a Whole Foods have seen 34 percent appreciation since they were purchased. According to the study’s authors, RealtyTrac, a provider of comprehensive housing data, 34 percent appreciation is average for all zip codes nationwide.

Homes near a Trader Joe’s also had a slightly higher value on average: $592,339, five percent more than the $561,840 average value for homes near a Whole Foods. The average value of homes was $262,068 across all zip codes nationwide.

In its analysis, RealtyTrac looked at home values and property taxes for 1.7 million homes, condos and co-ops in 188 zip codes with at least one Whole Foods store (and no Trader Joe’s stores) and 2.3 million homes, condos and co-ops in 242 zip codes with at least one Trader Joe’s store (and no Whole Foods stores). The average of current home values were compared to the average of home values at the time the home was last purchased.

Whole Foods, Trader Joe's storefronts

Photos: Wikipedia; RetailWirePhotos: Wikipedia; RetailWire

The study appears to underscore the appeal of Trader Joe’s, with several communities orchestrating campaigns over the years to bring a store to their town. It also demonstrates the leverage many coveted retailers such as Trader Joe’s have in securing favorable real estate deals, whether by gaining prized locations or tax breaks and other economic incentives. Premium locations are said to have a "magnet-like tendency" to draw other premium stores.

RealtyTrac spokesperson Ginny Walker said homes near Trader Joe’s and Whole Foods should both see appreciation because both study income levels, demographics and other data to identify up-and-coming markets before they enter. Ms. Walker told the Reno Gazette-Journal, "These two chains are disciplined in their decisions even if it means moving slower into markets than some of the lower end chains."

Writing for the Christian Science Monitor, Schuyler Velasco believes the higher appreciation by Trader Joe’s reflects that their stores are more heavily concentrated on the coasts while Whole Foods has more in the middle of the country.

Steve Kirn, executive director of the Miller Retail Center at the University of Florida, believes Trader Joe’s, with a smaller footprint, is able to reach more "hot” urban areas that are attracting young people and set to see appreciation. Prof. Kirn told the Tampa Bay Times, "People are not willing to go into the distant suburbs and, generally, Whole Foods builds more in suburban areas than in downtown kinds of areas."

A study earlier this year from real estate research group Zillow similarly found that homes within a quarter mile of a Starbucks store appreciated much faster than those further away.

BrainTrust

"Trader Joe’s is one of several retailers that seek out hot spots where incomes are very high, and newer developments with young people who like the experience of shopping their stores."

Tony Orlando

Owner, Tony O's Supermarket and Catering


"Really? Maybe we should give some props to a Trader Joe’s real estate group. I was surprised to find out their store counts are roughly equal, even though they have grown in very different ways."

Paula Rosenblum

Co-founder, RSR Research


"The association is simply that these retailers have top-notch real estate siting groups with beau coup software to back them up. They know where a new Pulte development is going up in the Chicago suburbs before Pulte does!"

Ben Ball

Senior Vice President, Dechert-Hampe (retired)


Discussion Questions

What correlation do you see between coveted retailers and rising local home values? Should favored retailers do more to take advantage of their status in communities?

Poll

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Tony Orlando
Tony Orlando
8 years ago

Trader Joe’s is one of several retailers that seek out hot spots where incomes are very high, and newer developments with young people who like the experience of shopping their stores. The real estate values would go up anyway, as other high-end stores want the same real estate knowing that the disposable income is there and will be spent locally. Cheesecake Factory comes to mind, Apple Store, Brio, Williams-Sonoma and others that follow the money, as they should.

I wish we had some of these retailers in my area but it will never happen, as the income per capita is highest on their choice for store locations, which will help their chance of succeeding tremendously. I was in Rocky River last night eating at a great Italian restaurant with my family in a restored high-end downtown area which was full of high-end stores, all doing great business. Crocker Park is five miles away doing huge business, as it is the fastest growing area of the west Cleveland suburbs full of beautiful homes and great shopping centers. Follow the money, and if you stand out with your format chances are you’ll be successful.

Paula Rosenblum
Paula Rosenblum
8 years ago

Really? Maybe we should give some props to a Trader Joe’s real estate group.

I was surprised to find out their store counts are roughly equal, even though they have grown in very different ways.

Let’s not forget though, Whole Foods did a lot of acquisitions at some point. As far as I can recall, Trader Joe’s growth has been completely organic (oh dear … unintended pun).

All in all, I just think it’s an odd and somewhat irrelevant correlation.

Ben Ball
Ben Ball
8 years ago

The association is simply that these retailers have top-notch real estate siting groups with beau coup software to back them up. They know where a new Pulte development is going up in the Chicago suburbs before Pulte does!

David Livingston
David Livingston
8 years ago

Both Trader Joe’s and Whole Foods tend to go in areas that have high incomes and high paying jobs (such as large medical center complexes), and where residents have high education levels and an above average median age. People don’t need to read a demographics report if they see a Trader Joe’s or Whole Foods is in the neighborhood. The neighborhood is automatically perceived to be nicer when those two are there.

When it comes to food retailers, Trader Joe’s and Whole Foods are by far the top two sales per square foot performers in the country. I recently was reading a movie studio’s website that mentioned they had a good location because there was a Whole Foods nearby. I asked my kids what they missed most since moving away and they said Trader Joe’s. I own several Trader Joe’s Hawaiian shirts. If I wear one people treat me super nice thinking I work for the company. The thing is while it is probably true most of the time that the areas are nicer, it can be somewhat of an unfair advantage.

Jonathan Marek
Jonathan Marek
8 years ago

This is a classic confusion of correlation and causality. Or maybe just straight reversal of causality. These stores locate in areas they expect to improve and they locate in areas that trend higher income (which happen to have had greater home price increases recently). But there is no evidence here that the retailers actually help home prices. That would be an interesting study but would require a control group of like locations where they did not move in.

Jeff Bulger
Jeff Bulger
8 years ago

I agree with the above.

TJ and WF target these areas to build new stores. This article’s assumptions are like saying that because I build my shipbuilding business near the river I am encouraging the water to flow.

Don’t get me wrong. I am sure people enjoy having a TJ and/or a WF nearby. I just think that the causal relationship is completely misstated.

Proof of the old adage about lies, damned lies and statistics.

Larry Negrich
Larry Negrich
8 years ago

The results of this “study” really don’t mean anything. First issue is what the study is measuring: appreciation of a house since last time it sold in a zip code that has a Trader Joe’s. Really, this is a study? So a home owner purchases a house in 1980 for $75K and has the great fortune of Trader Joe’s locating a store in its zip code in 2014. The homeowner sees the opportunity and sells the house for $100K making a sweet $25K profit in just a single year of Trader Joe’s co-location. (Imagine the profit that could have been made if the homeowner had waited another year.) Or, the pessimist/realist/pragmatist/human, and there are those out there, might say that the home appreciated by $25K over the span of 35 years and recently the drive to Trader Joe’s became more convenient.

Lee Kent
Lee Kent
8 years ago

No retailer worth their salt does not either have their own retail real estate group or use a reputable retail real estate group for site selection. The location does not happen because of the retail, the retail happens because of the location…usually. Sometimes retail takes a gamble and wins…or loses.

And that’s my 2 cents.

Jerry Gelsomino
Jerry Gelsomino
8 years ago

I used to live in Santa Monica, CA, in a home two blocks walk away from a very busy TJ’s. We would make several trips a day to the store. Convenient, friendly, fun, the whole neighborhood shopped there. House values in the neighborhood have tripled. Go figure!

Lee Peterson
Lee Peterson
8 years ago

Whoo! We just had a Whole Foods open a few blocks from us. Nice!

It’s completely about having the convenience of great food options (including ready-to-go meals) within minutes of your home. People forget because of all the press Whole Foods or Trader Joe’s get, but there’s really not very many of them. Unfortunately, it’s a luxury option at this point (unless you’re in California, that is).

So yeah, I get it, you guys just upped the whole neighborhood with better eats, thanks.

Hy Louis
Hy Louis
8 years ago

They should do a study on home values when a Walmart opens in a neighborhood.

Ed Rosenbaum
Ed Rosenbaum
8 years ago

I am not ready to accept this as a trending point. I think it is more coincidental than an atta boy to Trader Joe’s. But no matter what is said, I want to be closer to Trader Joe’s when/if I move again.

Arie Shpanya
Arie Shpanya
8 years ago

It’s a two sided relationship: grocery stores locate in areas that they think will attract their target customers and consumers who prefer certain grocery stores might be willing to pay more to live closer to them.

Kai Clarke
Kai Clarke
8 years ago

This is a poor study with poorly designed parameters and too specific of a question base. By avoiding the main questions of why a homeowner purchases a specific home, this study “creates” correlations between retailers when one really doesn’t exist. However, favored retailers should always maximize any opportunity to increase their status and awareness in their communities since this is a proven position to increase their reach and create better customer loyalty.