The Starbucks Factor is what they call it. When this highly successful retail chain of coffee hangout houses opens a new store anywhere…magic happens…transformation happens…cash flow happens. The neighborhood is about to become hotter and real estate values will benefit as well. I trust the Starbucks factor because I know that the company has done its homework – sophisticated market and demographic research that will show profitable indicators for a new store even before it buys the space and opens a store. That same demographic and market factor that makes Starbucks open a new store in a new neighborhood makes me want to own real estate nearby. I expect the neighborhood to have a prosperous future. How many Starbucks have you seen close up due to a lack of people?
Over the last 2 years, the neighborhood in which Davis Apartments is located in, the tenant profile, I noticed, has changed ever since Starbucks intruded on the scene. I rarely myself hung out there, but it has a certain feel to it now, kinda like a young downtown, but not so serious as our “real” downtown. You know what I mean?
Well, as things changed over there, so did the rents everyone else was charging. As the economy weakened, the rents actually went up because of the “new” type of tenants the “new” downtown was attracting. Thank you Starbucks! I’ll have another chai tea latte please! And make it a venti size!
I believe the lesson here is obvious folks. When considering where to invest next, watch out for who’s coming into the neighborhood? Starbucks is a winner.
Another winner is Wal-Mart. Years ago, as a commercial broker, I watched new Wal-Mart stores “takeover” and highly influence commercial real estate in their immediate area. Most times, it was for the better…
But here’s a losing proposition to pay attention to in your neighborhood. In the wonderful city of Houston, Texas, I learned that there are little to no zoning laws. And how does or how should this affect your investing decisions? Easy. It is possible (cuz I’ve seen it!) that a strip club may build their “gentlemen’s club” right next to your 4-plex apartment building. That’s not what I call a positive influence, right? What type of “new” tenants will that business attract to the neighborhood? Not the kind you can bring home to mama that’s for sure.
So, the lesson here is to do your own research on zoning in your neighborhood. If there is vacant land next door to an apartment you’re considering buying, see what it is zoned for during your due diligence.
Zoning will determine who can potentially build what in your neighborhood. I vote for Starbucks over Lucky Stars Club any day! To find out the zoning, you can simply call your local department of planning and zoning office. Just give them the address.
I’d like to personally thank Howard Schultz, the CEO of Starbucks, for the increase of cash flow and upgrading the “flavor” of my tenants!