Could your local Whole Foods, ALDI’s or Trader Joe’s have an impact on the value of your home or owned property?
A recent study by ATTOM Data Solutions on the “Grocery Store Battle” analysis, had interesting findings on how local grocery stores can positively affect surrounding home values. A property located nearby a Trader Joe’s, Whole Foods or an ALDI can impact home prices for both homebuyers and fix and flip investors, causing properties to appreciate in value long-term. The study involved analysis of current average home values, estimated home price appreciation over the next five years, national home equity averages, house flipping rates and other factors across over 1,800 zip codes nationwide.
This is how a Whole Foods, Trader Joe’s or ALDI can affect your next real estate investment for the better.
Data For Homebuyers
The study found favorable conditions for properties which were located nearby to a Trader Joe’s, as these resulted in average selling ROI’s of 51%. Comparatively, the study found that properties located close to a Whole Foods outlet had an average home seller ROI of 41%, and those near ALDI’s an ROI of 34%. Across all zip codes considered by the analysis, the average ROI for properties on the market was found to be 37%. Homes found close to a Trader Joe’s also had added equity, with average homeowners owning about 37% ($247,445) in their homes.
Homes in the vicinity of Whole Foods had an average 31% equity ($187,035) and those near ALDI’s had an average closer to 20% ($53,650).
Data For Investors
The study also found positive impacts to be had for real estate investors. Homes found nearby to an ALDI’s outlet were found to be more profitable for fix and flip investors than other retailers, grossing an average ROI of 62% across all zip codes analyzed. Properties found closer to Whole Foods, on the other hand, had an average gross flipping ROI of 35%, and Trader Joe’s 31%. The average gross flipping ROI for all the zip codes included in the analysis overall was found to be 52%.
In terms of home price appreciation, the study found homes closer to ALDI’s saw average appreciation increases of 42%, with Trader Joe’s coming in at 33%. Properties found closer to a Whole Foods store had an average five-year appreciation of 31%, and the average across all of the zip codes analyzed was 38%.
The Million Dollar Question: Why?
To the typical consumer, convenience and close proximity to sought-after amenities are worth paying a premium price for real estate. Whole Foods, in particular, is considered to be a high-end grocery store with plenty of desirable products and therefore adds value to the entire location by drawing the consumers. These stores, in turn, attract the perfect demographic of homebuyers and fix and flip investors to the area.
When a new Whole Foods, or another retailer on the list, is planning a new location, the companies will often work with demographic information in the neighbourhood prior to launching in order to ensure the best match possible with local consumers. Companies will also consider the amount of physical space available to build on, the cost to purchase and rent. Opening a store of this nature in a gentrifying area is a big investment to these retailers.
The Other Side of the Coin: Why Not?
The presence of one of these stores in a neighborhood won’t increase home value overnight. While closer amenities do have an impact, the actual state of the property itself will have the biggest influence on market value compared to other properties nearby. When these retailers open outlets in the area, the accumulative price appreciation will likely take multiple years before the positive effect on local property values will become tangible. These appraisals also mainly consider comparable home sales in the area and aren’t 100% definitive.
The Grocery Store Battle analysis found that the presence of certain retailers can have potentially positive impacts on local home values over the longer-term. For homebuyers, properties closer to Trader Joe’s, Whole Foods and ALDI resulted in an average ROI of between 30 and 50%. For fix and flip investors, ALDI was found to be the most valuable grocery store presence, with close-by properties grossing an average ROI of 62%.
Still, the question remains, does the presence of the store directly affect home values or do these companies find locations where the most interest will be generated?