Trendy shops put a shine on home values

Local study finds proximity to amenities

By peter korn

The Portland Tribune, Sep 25, 2008, Updated Oct 30, 2009 (7 Reader comments)

L.E. Baskow, JIM CLARK / and Getty Images

You can call it the New Seasons Effect, or the Whole Foods Effect, but developers and city planners have talked about it for years. In short, nothing says you’ve arrived as a neighborhood quite so emphatically as a New Seasons specialty grocery store down the block.

And now there’s evidence showing how much that upscale grocery means to Portland-area property values – an extra 20 percent or so for homes within a block and a half, according to a study by local economic consulting firm Johnson Gardner.

Everything else being equal – same home, same neighborhood – if a specialty grocery store sits within a block and a half of your house, your property values should be 20 percent higher than if you don’t have the store nearby.

And specialty groceries aren’t even No. 1 on the list of shops that will elevate the value of nearby homes. That distinction belongs to small neighborhood movie theaters, according to the Johnson Gardner report.

All things being equal, a small movie theater can raise property values somewhere between 14 and 30 percent, according to the study. Wine bars and garden shops also provide a boon to homeowners. Bookstores, fitness centers and bike shops do the same, to a lesser extent.

Jean Lea is a believer.

“It’s a huge perk,” Lea says, of living directly behind the Sellwood New Seasons for four years.

And the nearby Moreland Theatre, she says, clearly has affected the neighborhood. “It seems so quaint to be able to walk to a movie theater at night, because then you know you’ll be able to walk to lots of restaurants, too.”

Study used 2006 numbers

The 2007 Johnson Gardner study also found some downsides. It found two types of stores associated with lower property values – day spas and CD and record stores.

Some developers apparently had this figured out all along. Metro planners commissioned the study after learning that a local developer had begun asking 20 percent more for condos in the Southeast Portland project he was building – based on rumors that either a Whole Foods or New Seasons was going in next door.

Agencies wanted hard numbers on which types of stores increased property value, and how much, said planner Megan Gibb, manager of Metro’s transit-oriented development program, which commissioned the study.

The study was based on 2006 housing sales, which brings up a semi-disclaimer.

That was the year housing prices hit their peak in Portland, and things have been stagnant, or declining, pretty much since then.

But Bill Reid, an economist at Johnson Gardner, said while the “amenities effect” may be a bit tamped down in a slow market, he expects them to reassert themselves when the housing market rebounds.

Reid said researchers looked at all 2006 home sales in the Sellwood, Division-Clinton Street and Multnomah Village neighborhoods of Portland, the Murray Scholls neighborhood in Beaverton, and in Lake Oswego. They compared sales of equivalent homes and condos near and distant from different types of shops. After compiling the sales data, Reid said, researchers interviewed developers to make sure their findings coincided with what developers intuitively had observed.

Reid said he’s fairly confident about most of his findings, especially the influence of specialty groceries and movie theaters. Smaller tenants, such as wine bars, which the study showed could raise nearby property values between 11 and 21 percent, were more difficult to assess, Reid said, because there were fewer of them in the study. That same qualifier might apply to the negative effect from day spas and CD and record stores, Reid said.

Damin Tarlow, development manager at Gerding Edlen, one of Portland’s largest development firms, said he believes in the underlying ideas behind the Johnson Gardner study, but is not quite sure about the reliability of its numbers.

Tarlow wonders if it’s possible to parse out the effect one store has, when a neighborhood consists of such a mix of amenities.

Gerding Edlen brought in Whole Foods as an anchor in its Brewery Blocks development in the Pearl District, and Tarlow says it clearly has helped nearby property values.

“But could you quantify the effect Whole Foods has, the effect Anthropologie has, the effect P.F. Chang’s has?” Tarlow said. “The fun of real estate is yes, numbers drive a lot of things, but at the end of the day, so much is art, so much is science. I’ve seen little tiny restaurants change neighborhoods.”

Parking makes the difference

The overwhelming impact of neighborhood theaters probably is the most surprising finding in the Johnson Gardner study. But Reid said a theater such as Cinema 21 in Northwest Portland can have a tremendous effect on everything around it.

“A movie theater really changes things for a district because it changes the length of time during the day a district is open and active,” Reid said. “With a movie theater, your daytime district all of a sudden is a great location for restaurants and other activities at night. It turns it from an eight-hour district to a 14- or 16-hour district.”

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