Jul 14, 2008 11:09 pm US/Central
Do Starbucks Closures Worsen Falling Home Values?
(WCCO)
Starbucks announced Monday that it is closing seven Minnesota stores by the end of the month, and that is just the beginning. Starbucks plans to shutter 600 stores nationwide by early next year. So could the closings have an impact on homeowners?
It wasn't long ago that Starbucks was admired for opening stores in prime locations. The company was known for doing its homework, and its brand is so recognizable that real estate agents would advise their clients to buy a home where the next Starbucks was opening because their home value would likely increase.
However, if you bought into that theory, and bought a home near the Brooklyn Center Starbucks on Highway 252 when it opened last March, you might be wondering if your home value is about to take a hit. That's because the Brooklyn Center Starbucks will serve its last mocha latte in about two weeks.
Some homeowners may feel that it's kind of like buying a cappuccino and ending up with a regular coffee. It is just not the same but that doesn't mean it is going to leave a bad taste in the homeowner's mouth.
"It's hard to see that that would be the main predictor of the price of your house going up or down, that would be unlikely," said Santiago Bazdresch, finance professor at the University of Minnesota.
Bazdresch is fully aware of the Starbucks factor. When the coffee shops opened in the past, other businesses have followed right behind, bringing money to their neighborhood.
He doesn't think a Starbucks closing in someone's neighborhood would hurt their home value, but if other businesses follow suit, this time it could get ugly.
"There's less growth in the U.S. There's less growth in the financial markets. There's less growth in the economy in general," said Bazdresch.
Bazdresch said there are two main reasons why Starbucks decided to close 600 stores. The company expanded too fast and demand has decreased during a sluggish economy. However, he looks for the company to rebound in the future.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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