The ‘Starbucks Effect’ Fueled Real Estate Growth for Decades. Now It’s Closing 400 Stores.
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Between 1997 and 2014, homes within a quarter mile of a Starbucks rose in value by 96%. Meanwhile, nationwide, home prices climbed only 60% in that same period.
For years, that difference was enough to convince investors that the coffee chain’s presence was a shorthand for growth. But according to a recent Bigger Pockets report, the “Starbucks Effect” may finally be running out of steam.
How Starbucks Became a Real Estate Signal
For more than two decades, a new Starbucks was like a stamp of approval from the real estate gods. The familiar green-and-white awning often appeared in neighborhoods already on the upswing, acting as a magnet to investors, higher-income residents, and other major retailers.
Hannah Jones, senior economic research analyst at Realtor.com, explained that Starbucks’ presence was more of a reflection of growth than a driver of it.
“The presence of the café could then add to the area’s appeal, along with the other factors that convinced the company to open the location to begin with. Put differently, Starbucks doesn’t cause home values to rise on its own; instead, it tends to open stores in neighborhoods where other factors, such as economic growth, rising demand, and increasing property values, are already at play.”
In other words, Starbucks didn’t make the neighborhood hot; it followed the heat. But for landlords and investors, it was an easy indicator that the area had momentum.
Where the Closures Are Happening
Starbucks plans to close 400 underperforming retail stores while cutting around 900 corporate jobs. The company still operates about 18,000 physical locations in the U.S. and Canada, but the closures are concentrated in dense urban areas where the brand once thrived.
Cities like Philadelphia, Northern Virginia, Baltimore, and Washington, D.C. have already seen clusters of stores shut down.
Philadelphia alone lost five locations. In the D.C. metro area, 16 stores have closed, including nine within the city itself.
Jones told BiggerPockets that most of these closures align with “high-profile urban locations” where foot traffic still hasn’t recovered. Many of these are city-core corridors that depend on commuters, who are still a vulnerable segment of the commercial market since the pandemic shifted work patterns.
The Reverse Halo Effect
The presence of Starbucks has long been viewed as a catalyst for growth. But its departure could have the opposite impact.
Todd Drowlette, a former exclusive real estate broker for Starbucks who now represents Dunkin’ Donuts in New York, told Realtor.com that the concern is less about one store closing and more about the ripple effect.
“People consider a neighborhood’s total package. Having amenities in close distance adds to the desirability. Everyone wants convenience today. Whole Foods still brings with the brand a feeling of an upscale community because people know the type of neighborhoods they are located in.”
He added that while one Starbucks closure might not matter much, multiple closures in the same area could “begin the downward spiral” that hurts property values.
Other Brands with the Same Effect
Zillow’s original 2015 study found homes near Dunkin’ Donuts increased in value by 80%, slightly less than those near Starbucks. But grocery stores also show strong real estate correlations. A 2022 ATTOM survey found that homes near:
- ALDI rose 58% over five years
- Trader Joe’s rose 49%
- Whole Foods rose 45%
Rick Sharga, then at ATTOM, summed it up in the report:
“It turns out that being located near grocery stores isn’t only a matter of convenience for homeowners but can have a significant impact on equity and home values as well. And that impact can vary pretty widely, depending on which grocery store is in the neighborhood.”
What the Closures Could Mean Long Term
According to BiggerPockets, the current wave of Starbucks closures may reflect broader economic pressures, from labor and rent to supply chain costs.
It may also highlight shifting consumer values as Americans rethink premium spending during an affordability crunch.
Analysts at Forbes have noted similar trends across retail and dining: as inflation and lifestyle costs rise, Americans are cutting back on small luxuries (even during pumpkin-spice-everything season).
The Wall Street Journal recently added that many are eating out less, which could hurt both commercial landlords and residential investors who depend on thriving retail districts to attract tenants.
The ripple effects could reach beyond commercial real estate, touching housing affordability, local employment, and investor confidence. Neighborhoods that lose key anchor tenants often face longer leasing cycles and declining walkability, two factors that can drag on both rental income and home appreciation.
If the “Starbucks Effect” once marked the beginning of a neighborhood’s rise, its reversal could test which markets have staying power without the brand’s halo.
The larger question is whether these closures are isolated events or early signals of a broader recalibration in urban retail. For investors, landlords, and agents tracking market health, the coming months will reveal whether the loss of a green mermaid on the corner is just a sign of evolving tastes or a red flag for declining demand.
While no single retail closure determines a market’s fate, patterns like this are worth watching.
Key Details:
- BiggerPockets reports that homes near a Starbucks once rose 96% in value between 1997 and 2014, compared to a 60% national average.
- Now, the coffee giant is closing 400 stores and cutting 900 jobs, with clusters of closures in Philadelphia, Northern Virginia, and Washington, D.C.
- The shift could mark the end of the “Starbucks Effect” that long signaled neighborhood growth and stability.
Sarah Lentz | Oct 20, 2025 | Housing Market
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