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What Happens 

When Starbucks 

Comes To Town?

Janet Steinberg

The Harvard Business School found that housing prices increase 0.5% within a year of Starbucks moving into town.

How did this esteemed business school find out? The Harvard Business School used Yelp.

Edward Glaeser, Harvard economist and chief researcher for this study, used Yelp data to complement statistical data from “tried and true” sources such as the US Census Bureau and Census Bureau. Why? “Because data from Yelp is likely to be more up to date than government sources and Yelp data makes the individual front and center to any questions being asked.”

The goal of this study was to determine whether housing prices increased due to Starbucks moving into town or whether affluent customers who patronize Starbucks moved into that town.

Glaeser said the Yelp data “reveals the latter…the most natural hypothesis… (affluent customers who patronize Starbucks moved into town)…the most natural hypothesis…that restaurants respond to exogenous changes in neighborhood composition and that restaurant availability is not driving neighborhood change.”

The broader point of Glaeser’s research is that gentrification (the process of rebuilding homes and businesses accompanied by an influx of middle class and/or affluent people at the expense of earlier, often poorer, residents within a neighborhood or zip code is “strongly associated” with increases in the numbers of grocery stores, cafes, bars, restaurants. In plain English, the more “high end” retail and service businesses in town, the more “high end” customers come to town.

Glaeser said that though the presence of a Starbucks is less important than the community itself having people who come to the town to consume Starbucks’ products. “…we think this variable (the number of consumers who drink/eat Starbucks) is likely to be a proxy for gentrification itself.”

Additional studies on the effect of Starbucks on home prices corroborate the findings of this most recent study.

Housing consumers, expect to see higher returns on the sale of your house and/or expect to pay more to buy a house when Starbucks comes to town.