Follow the Leader

Property investors are constantly looking for indicators that an area is about to experience an increase in property value. There are many ways to understand those changes and anticipate signs of positive growth for an area. Some of those tools include demographic information from census data, foot traffic patterns from mobile locations providers, and even move-ins from truck rental and logistic companies.

However, researching and analyzing this information is time-consuming and costly, and only feasible for large full-time property acquisition teams. Some investors have recently found a new method to predict the future of a neighborhood – by following the brands in the area. This trend was covered in a recent article by Franco Faraudo on Propmodo.

Site selection is one of the most important decisions a retailer can make and may ultimately determine the success or failure of a business. Some investors have followed the lead of these brands and invested near newly opened retail locations. By doing this, they avoided part of the considerable time and expense of conducting research on their own while essentially using the work each of these retailers does before choosing their storefront location.

In some cases, retailers such as grocery stores can increase the property value of the neighborhood around it. A recent study by ATTOM Data Solutions revealed how grocery stores can boost surrounding home values. It found that properties near Trader Joe's had an average return on investment of 51 percent, while those near Whole Foods had a 41 percent ROI and properties by ALDI had 34 percent ROI. Homes near Trader Joe's had higher homeowner equity, averaging 37 percent, compared to 31 percent near Whole Foods and 20 percent near ALDI.

The study also showed that ALDI has been able to target neighborhoods with upward mobility. Properties near ALDI were the most profitable for fix-and-flip investments with an average ROI of 62 percent, compared to 35 percent near Whole Foods and 31 percent near Trader Joe's.

Starbucks is another brand worth following for property investors. A study conducted by Zillow showed that properties close to a Starbucks increased in value by 96 percent, compared to 65 percent for all U.S. residential properties. Larger cities like Boston, Philadelphia, Washington DC, Chicago, and Baltimore experienced the biggest increase in property values after a Starbucks was opened within a half mile.

Walmart was another brand that added to the value of a property, particularly in rural areas. One study looked at more than a million housing transactions near 159 Walmart stores that opened from 2000 to 2006. It showed that new Walmart stores increased housing prices by 2-3 percent for houses within a half mile of the store and 1-2 percent for homes between a half mile to one mile from the store.

Some property investors have been able to piggyback on the research conducted by retailers to accurately predict an increase of property values in certain areas. The numbers are quite revealing and the practice can save investors considerable time and money. Understanding these trends can provide valuable information into making informed property investment decisions.

The full article on how property investors follow retail brands can be found here.