Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Saturday, March 12, 2016

Why is it news that houses are worth more when located near perceived high quality stores?

Over the past few years, Walmart has cut back on labor and products, leading to many out-of-stock situations and dirty, dingy stores.  Photo: Brian Sozzi/Belus Capital Advisors.

The Wall Street Journal writes in "When it comes to home values, is it better to own near a Wal-Mart or Target?" about how houses are worth more when they are near Target discount stores--which have the reputation of being fun and trendy--than they are near Walmarts, which are perceived to appeal to low income shoppers.

(Because of this reality, it shouldn't be a surprise that the company's move in center cities such as Washington have so far been less successful than they expected.  The photos in this article showing Wal-mart out-of-stocks are almost three years old, but the "new" Walmarts in DC often look pretty similar.)

From the article:
Data firm RealtyTrac reports that the average home in areas where a Target Corp. store is located is worth 72% more than a home near a Wal-Mart Stores Inc. location. In Target areas, homes are worth $307,286, versus $178,249 for Wal-Mart locales.

In addition, people who own homes in areas where Targets are located saw more appreciation on their houses than in areas with a Wal-Mart. ...

Back in 2014, data from Kantar Retail showed the average Wal-Mart shopper had annual household income of $53,000, nearly 25% less than the average for the typical Target shopper. The latter chain’s average consumer also skewed younger.
Similarly, there have been stories about how houses are worth more near Trader Joe's and Whole Foods.  From the Zillow press release "Homes Near Trader Joe's, Whole Foods Stores Appreciate Faster":
The analysis clearly shows that homes near the stores appreciate more quickly than homes in the city as a whole. That means the two brands are very good at choosing locations that will appreciate faster in the future, or are actually spurring home appreciation growth – or some combination of the two.
But that higher property values connote to proximity to Trader Joe's over Whole Foods ("Why It's Better to Live Near Trader Joe's Rather Than Whole Foods," Time Magazine).  That makes sense to me only in that TJ's has fewer stores and is more selective so that likely it chooses even higher income areas to locate stores than Whole Foods.  It's the companies seeking out high value locations, not the stores generating high values.

Or from Zillow about Starbucks ("The 'Starbucks effect': Higher home prices" CNN):
The value of homes within a quarter-mile of a Starbucks rise faster than those that aren't, according to real estate research group Zillow. Between 1997 and 2013, home closer to the coffee shop increased in value by 96%, compared to 65% for all U.S. homes. ...

But dig a little deeper and it's kind of a chicken and egg situation -- it's not like Starbucks can take credit for changing a community. The coffee chain is very good at finding locations that are up-and-coming, the authors said. Homes near Dunkin' Donuts also appreciate faster than the nation's housing as a whole, but not as fast as those next to a Starbucks, according to Zillow's analysis.
Um, wheres the news here?  Higher income areas are marked by higher real estate values for residential properties.  Stores that appeal to higher income customers are going to locate in these areas to the best of their ability.

Similarly, elected officials need to consider store reputation and their customer satisfaction ratings when making decisions about recruiting them to their communities.

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At 12:40 PM, Anonymous charlie said...

correlation, causation etc. all the same I was going to send this to you.

As I mentioned to you a while ago, your place in the american middle class hierarchy is inverse to the distance to a Walmart. Rather the opposite of the Chicago style map of concentric circles.

What continues to puzzle me is Walmart making the some noise as Supervalu did a few years ago that a majority of customers on benefits and can't deal with price increases. Given Walmart's size I have a hard time believing that.

The path upwards is making retail an experience again.

At 7:25 PM, Blogger Richard Layman said...

I forgot about that with Supervalu and Savalot.

I think WM though is just making excuses. The fact is that on many items, they are undersold by dollar stores and Aldi. And probably people aren't buying as much of the big ticket items.

The thing that bugs me about the ongoing recession is the failure to understand the point of a "capitalist crisis and overcapacity."

We've got lots of overcapacity, and the majority of financial benefits from efficiency being skimmed off by the 1%, so the less well off have less money to spend.

I think WM has hit its maximum market area. It can try to grow, but the people who shop there or want to are already shopping there. If they haven't been as successful in DC, it's because most reasonably well off DC residents have no interest in shopping there.

Similarly, the supermarket trade mags. talk about the decline of Whole Foods and one of the lines they say is that WM is selling organic foods, along with Kroger etc.

I sometimes comment on the articles saying WM is no substitute for Whole Foods. I bet fewer than 5% of the organic audience is willing to go to WM. It's a lifestyle choice more than anything, and the perception of an organic lifestyle isn't congruent with WM.

I just don't see how WM's brand/image/positioning is congruent with higher income audiences, whether or not they locate in cities.

But yep, this is correlation. I just didn't feel like using the line, since they use it all the time in GGW.

At 9:16 AM, Anonymous charlie said...

"I think WM though is just making excuses. The fact is that on many items, they are undersold by dollar stores and Aldi. And probably people aren't buying as much of the big ticket items. "

Well as we've discussed before WM is more of a logistics company than a retailer. And yes, it is excuses. Much like Supervalu, once the remaining chunk of Albertson's was sold cerebus was able to grow sales a lot. Higher prices, better execution.

(And that is WF's problem right now. Execution.)

RE: Capitalist Crisis and current politics.

If we are at at the end of a 30-40 year giant debt cycle -- then we need to be looking at debt removal, fiscal policy (i.e. massive stimulus) and redistribution. I think both Trump and Sanders have picked up on that.

Somewhat off topic:

At 12:52 PM, Anonymous Richard Layman said...

I might rewrite the lede on this and re-date it. I can't believe I forgot to mention the line in the industry, "retail follows rooftops," not the other way around.

After H St.'s plan in 2003, the first new substantive business we got was a Family Dollar. With a couple of exceptions, chain retailers don't lead revitalization, they follow it.

At 1:01 PM, Anonymous Richard Layman said...

Hmm, I responded to your piece, but the response seems to have been eaten. Anyway, the Littlefield piece is pretty searing. Debt fueled consumption gets to the hell to pay point eventually.

I have been mulling a piece about the real lesson from Flint being how our system of municipal finance -- mostly based on property taxes -- and irrespective of the problem of pensions, is built on a paradigm of growth.

Growth was based on mass industrialization, the growth of the pie, and the spread of its benefits.

As long as you could count on the economy continuing to grow you could get a job even with limited education, buy cars, have a vacation home on a Michigan lake, etc.

But that particular way of life is an artifact of a certain point in the economic cycle of the nation.

it's not maintainable as the world shrinks, and industry reorganizes on a global scale, and capital continues to trump labor within the various sectors of the economy (from Ipads instead of waiters to robots instead of factory workers).

I just don't see how it's possible to support 100+ million households in the US with "good jobs" in a capital-dominated economy that is organized on a global scale.

Especially when so much of our economy has been commodity focused (agriculture, coal, etc.).

At 2:30 PM, Anonymous charlie said...

Well a lot of the pension problems Littlefield writes about are really an artifact of that same problem.

You make assumptions on pensions for future growth -- say 6 or 7 % which look reasonable in 1993. We are going to invent the internet, after all.

So you underfund a bit based on those higher returns.

What happens of course in volatility in even "safe" markets like mortgages. So you're really looking at at 2-3 percent return after fees and losses.

And then looking forward from here bond markets are assuming very slow growth (low interest rates) which means you've got to fund even more to match that projected 6 or 7.

So, yes, we need growth.

At 2:41 PM, Anonymous RIchard Layman said...

similarly, suburbs were constructed for decent income households with kids ranging in age from late 20s to 40s. They aren't very robust in terms of urban and transportation design and don't work well for people outside of those age boundaries. E.g., the call for suburbs to add transit, deal with aging populations, poor populations, etc.

Suburbs aren't a very good "technology" or platform for dealing with those kinds of issues.


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