The Whole Foods Effect: Impact on Property Values, and Predictions for New Store Locations
Many renters agree that having easy access to gourmet grocery stores like Trader Joe’s and Whole Foods is a definite perk, but did you know these stores can actually impact the overall cost of living and rent prices in their cities? Homes often appreciate in value and rents go up when there is a Trader Joe’s or Whole Foods nearby, with significant growth occurring in the first years after store opening.
Imagine being able to predict the next location for one of these high-end grocery markets, which would in turn allow investors, businesses and individual home buyers to identify a critical period of property value appreciation. We have discussed in the past how advances in machine learning, and new sources of alternative data, can give deeper insights into predicting the next up-and-coming neighborhood.
To put that theory into action, we decided to pair our vast data sets with our proprietary Market Similarity algorithm – the goal was to see if we could forecast changes in rents in a given neighborhood based on having a Whole Foods or Trader Joe’s location.
Our team of data scientists first studied all the zip codes that currently have a Whole Foods or Trader Joe’s and confirmed that there is a clear relationship between rent growth and the opening of Whole Foods or Trader Joe’s. Notably, cities with a new Trader Joe’s or Whole Foods saw increased rent in the three years after a store opening.
By the time a store has opened in a neighborhood, the opportunity to invest or capitalize on upcoming growth is already shrinking – which is why we then worked to identify the ten markets that are likely to see a Whole Foods or Trader Joe’s open in the near future.
These markets are primed for one of these chain grocery stores to move in, as they share similar characteristics to neighborhoods that have had a Trader Joe’s or Whole Foods recently open. Our algorithm identifies similarities in workforce income percentile and industry type, income growth, educational attainment, and demographics. Below are the ten lookalike neighborhoods we feel are primed for investing, and most likely to see an increase in growth and rental rates with the addition of a Whole Foods or Trader Joe’s.
We’re excited to keep an eye on these data-driven predictions and see what growth occurs in these ten zip codes. What other key economic indicators should we consider for our next study into neighborhood growth? We’d love to hear your ideas.
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