Buy Alexandria Real Estate: The Starbucks Effect -- My Data Says It's Real!

Consider it a chicken and the egg question. You know, which came first?

What's the Starbucks Effect?

It's the idea that super-cool Frappuccino joints increase the value of homes in the neighborhoods where they decide to locate their coaches, cappuccinno makers, and coffee bean grinders. Do these caffeine peddling haunts increase property values or do they just open up in communities where the more expensive homes already exist -- thus taking advantage of a customer base that can presumably afford the Vente Iced Skim Mocha No Whip?

I decided to find out by taking a look at some of the facts and statistics here in Northern Virginia.

First, I watched the following video about Arlington, Virginia which has been making the rounds towards the end of last week. If you live in the area and haven't seen it yet, it means you haven't been on the internet in about a week. If you are outside Northern Virginia, you may miss some of the inside jokes but understand that this spoof hits it on the head about the culture of Arlington (or at least North Arlington). Make sure you watch this through the end...

So, inspired by this recent video, I decided to examine whether the Starbucks Effect existed in Arlington and Alexandria by reviewing the hard data about housing prices. It was only after completing this research that I discovered that the The Starbucks Effect is a well-documented phenomena. Follow along.

Arlington Virginia boasts 12 Starbucks stores -- 3 in zip code 22201, 3 in zip code 22209, 4 in zip code 22203, and 2 in zip code 22207. The areas located in Arlington zip codes 22202, 22204, 22205, 222206, and 22213 have no Starbucks stores, in other words, they are Starbuck-less.

Let's examine the average listing price of homes in the various Arlington locales:

Arlington Areas with Starbucks:

Zip Code       # of homes available       Average Price

22201                     129                       $696,923

22203                       54                       $519,798

22207                     143                     $1,197,137

22209                       87                        $945,433

TOTAL                         443                                 $856,981

Arlington Areas without Starbucks:

Zip Code        # of homes available     Average Price

22202                    76                          $727,312

22204                   144                         $423,608

22205                    39                          $906,418

22206                    40                          $392,451

22213                    10                          $871,315

TOTAL                     309                                   $569,698

Wow! The average listing price for a home in a Starbuck-less neighborhood is nearly $300,000 less than those in the high-caffeine areas of Arlington. Note to Starbucks management: You may want to consider opening up a branch in the 22205 zip code of Arlington!

Thinking this might just be an anomaly, I took a peek at the data for neighboring Alexandria. 11 Starbucks stores grace the streets of Alexandria Virginia. Not surprisingly, 9 of these are in zip code 22314, the Old Town Alexandria area of town which gets the most tourist traffic, and yes, the most expensive homes are located. The other 2 stores are located in zip codes 22301 and 22302. There are no Starbucks stores in zip codes 22304 or 22305.

Let's take a similar look at the data for Alexandria:

Alexandria Areas with Starbucks:

Zip Code        # of homes available      Average Price

22301                     37                          $778,912

22302                     46                          $434,531

22314                    240                         $923,212

TOTAL                      323                                   $837,087

Alexandria Areas without Starbucks:

Zip Code      # of homes available       Average Price

22304                 166                          $420,382

22305                   42                          $598,279

TOTAL                     208                                 $456,304

Once again, the numbers show that on average your purchase of a home in an Alexandria area served by Starbucks will cost you an additional $300,000+.

Starbucks Effect? Yes or No. You decide. I'm going to have my morning coffee tea.

One final note: It's no surprise to me that a two story Starbucks, and one of the busiest branches on the East Coast is located right next to my office in McLean Virginia -- zip code 22101. The average listing price of a home in that zip code is $1,657,101. McLean was recently named the most affluent community in America.

Maybe, just maybe, it was The Starbucks Effect!