Living above a Trader Joe's or Whole Foods can increase your rent, according to a new study by RCLCO Real Estate Advisors. People who live in apartment complexes that have a Whole Foods or Trader Joe's on the ground floor paid 5.8% more in rent in the spring of 2020 than those who lived in comparable buildings in the same neighborhood without one of those stores.
The premium people pay to live above one of these stores appears to be increasing, too. In 2016, the apartment complexes with Trader Joe's and Whole Foods on the ground floor also experienced a premium rental increase compared to comparable buildings without the popular grocers, but a smaller one: 4.3%.
These rent hikes are due to a trend called the "premium grocer effect," which represents an influx of consumers valuing access to high quality foods even more than access to one-stop shops such as Walmart or Target.
Here's why experts say premium grocers affect rent.
Stores like Trader Joe's and Whole Foods often expand to locations that are already desirable to those with disposable income, which can account for the increased rents found in the RCLCO report, says Jerry Hoffman, founder of real estate advisory firm Hoffman Strategy Group. In these areas, generally, "you have a college-educated workforce," Hoffman says. "You have a lot of singles or couples in the neighborhood with high disposable income."
The presence of a premium grocery is likely to bring more affluent residents to an apartment complex. Plus, those who are already in the neighborhood will probably want to shop there, meaning there will be no opposition from the community members who don't live in the building.
The affluence of a neighborhood, combined with the a focus on clean eating, is what makes apartments above premium grocers so attractive, says Vahe Avagyan of RCLCO.
"[Premium grocer] proliferation is part of a broader 'health and wellness' trend that has resonated especially strongly with millennial audiences, who have been the primary target market for most new apartment buildings," he says.
Stores like Walmart or Target are not concentrated in high-income areas and don't have as clear a focus on health as Trader Joe's or Whole Foods, which makes their appeal a little different.
Apartment communities with small-format Target stores on the ground floor are attractive to tenants, too, Avagyan says, and he expects that the presence of one would lead to rent increases, but "its appeal to renters is likely driven by slightly different trends — such as a need for convenience or 'one-stop-shopping.'"
If you're willing to pay a premium to live above a Trader Joe's or a Whole Foods, rent probably won't be the only increased monthly cost.
Consumers who walk or take public transit to stores spend more money than those who drive to stores, according to a 2008 study by the San Francisco County Transportation Authority of the city's downtown. If a premium grocer is on the ground floor of your apartment, you are more likely to make more visits and spend more money.
Plus, the more time you spend in a store, the more money you will probably spend, according to a 2015 Journal of Marketing study.
Other than possible increased spending on groceries, Hoffman says that there aren't many other cons to living above a premium grocer if you are looking to live in a health-focused environment.
"That Trader Joe's is likely to be by companies like Orangetheory Fitness, Pure Barre, or Pilates and yoga instructors," he says. "There are other elements associated with the Trader Joe's and Whole Foods that make the economic milieu of that neighborhood attractive to people who want to live there."
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