MARKET INTEL: The Starbucks Effect: Office Rents Rose Where Starbucks Opened Most Stores During Pandemic

The ‘Starbucks effect’ is a well-documented real estate phenomenon which suggests that locating a Starbucks in a neighborhood leads to an increase in property values around it. Starbucks is considered to have an intelligent and nimble real estate strategy which closely responds to emerging demographic and property trends, establishing new stores in neighborhoods on the rise or poised to grow and closing stores in areas on the decline.

The ‘Starbucks effect’ more likely describes Starbucks’ keen ability to identify strengthening markets, rather than the cause of real estate appreciation in its chosen markets. 

Since their founding in 1971, Starbucks’ locations have become important meeting spots, key fixtures of a morning work commute, and routine stops before a flight or a road trip. However, the onset of COVID-19 pandemic interrupted these routines, as it did so many others in daily lives. After social distancing regulations were enacted in spring 2020, Starbucks temporarily closed some locations, restricted operations, and/or shuttered other locations permanently.  In this blog, CompStak’s exclusive data is used to track the movement of office rents in the areas with the most closed and opened Starbucks locations during the pandemic.

Office Effective Rents Increased from Pre-Pandemic in Markets with Most Starbucks Opened During the Pandemic

Office rents grew from pre-pandemic levels in the areas where Starbucks opened the most locations over the last two years, outpacing the growth in submarkets with the most closures during the same period. This analysis included the cities which ranked in the top five for the most openings and closures since July 2020, according to Starbucks Everywhere’s website. Eleven cities ranked within the top five for Starbucks openings, ranging from 15 stores opened in New York to five in Fort Worth, Texas. At the same time, the top five cities for number of closures included New York City, Seattle, Chicago, Washington, D.C and San Francisco. 

The average effective office rent for the top submarkets for Starbucks opened increased by 24.9% from 4Q 2019 and was up 47.5% from the pandemic low as of 2022 year to date. For comparison, the average effective rent was up just 7.2% from the end of 2019 in the top submarkets for number of Starbucks closed, and up 23.3% from the pandemic low.

Office Base Rents Recovered Faster in Top Submarkets for Starbucks Openings

The average office base rent was up 55.0% from the pandemic low to 2022 year to date 2022 for the submarkets with most Starbucks openings, outpacing the 25.0% increase in the submarkets with the most closed stores.

Excluding New York City and Chicago Submarkets with the Most Openings and Closings, These Trends Were Still True

Both New York City and Chicago ranked in the top five cities for most openings and closings nationwide with New York City having the most overlap. Excluding the NYC and Chicago submarkets which ranked highest for openings and closings, the average base rent was up 27.2% from the pandemic low as of 2022 year to date for the combined set for top openings.Meanwhile, the average office base rent was up 15.9% for the combined submarkets with the most closings (excluding the NYC and Chicago submarkets which topped both lists).

Are you interested in tracking office rent growth to inform your own real estate strategies? Get started with CompStak for more insights and the best in class office lease transaction data.