When Burger King bought Tim Hortons late last year, the new entity became the third-largest fast-food chain in the world, with about 18,000 locations worldwide. Restaurant Brands International CEO Daniel Schwartz said at the time that Tim Hortons would become a household word all around the world, and people everywhere would now be able to experience what Canadians enjoy every day of the year. Great as that may be for the company and for national pride, there is no evidence yet of a “Tim Hortons effect,” however.
Unlike its US rival Starbucks, Tim Hortons has never been considered an up-market kind of operation. Its locations are in highway rest stops and strip malls, as well as on Main Street. Starbucks, on the other hand, has become famous not only for its coffee but for its fabled ability to choose the best possible locations. With more than 19,000 locations in sixty countries and counting, the coffee company has a lot of experience in choosing the right spot. And in what is now known as the Starbucks effect, homes that are located nearby have been shown to appreciate in value faster than homes that are not near a Starbucks.
In the US, Starbucks’ biggest rival until now has been Dunkin Donuts, and researchers found that homes near their stores did not appreciate as fast. The closer the home is to the Starbucks, the faster it gains value.
One might wonder about the causal relationship here. We know that Starbucks chooses relatively upscale neighbourhoods for its stores. The coffee they sell isn’t cheap, after all. They look for neighbourhoods where people have the discretionary income to become their customers. So wouldn’t it be reasonable to expect homes in those neighbourhoods to appreciate more than the national average anyway?
Yes, it would. Starbucks says that it is both following home price trends and leading, both the cause and the effect. The company moves into either an up-and-coming neighbourhood and helps it up-and-come even faster, or into an established “good” neighbourhood and helps make it even better.
Independent research claims to have found that even allowing for that complex relationship, and for the overall gentrification of neighbourhoods, the rate of appreciation of Starbucks-proximate properties is faster. In San Francisco, for example, the phenomenon resulted in home values rising 198.2 per cent over sixteen years. Homes not near a Starbucks appreciated by 184.9 per cent in the same period. Anecdotal evidence seems to support the claim too.
Whichever brand of coffee you may prefer to drink, it may be worth looking for the Starbucks in the neighbourhood when looking for your next home.
