This afternoon I was chatting with some friends about Toronto real estate (which is something that happens a lot in this city), and we started talking about “The Starbucks Effect.”
Basically, we were talking about how this neighborhood just got a Starbucks and how that neighborhood already has one. We were, like a lot of people, using Starbucks as a proxy for neighborhoods that are emerging and neighborhoods that have already arrived.
There’s been a lot of discussion about the correlation between home prices and the presence of a Starbucks. But the big question is what comes first: the home prices or the Starbucks?
Earlier this year, the CEO, Spencer Rascoff, and Chief Economist, Stan Humphries, of Zillow.com argued that the mere presence of a Starbucks can cause gentrification.
They argued that Starbucks knows the next hot neighborhood before anyone else does and that they are “the fuel, not the follower.” And through their data they demonstrated that homes (in the US) near a Starbucks appreciated significantly faster than homes not near a Starbucks, or even homes near other coffee shops such as Dunkin’ Donuts.