What Happens to Neighborhoods When Starbucks Closes? New Research Suggests a Disappointing Answer

Remember the Starbucks Effect? That’s the phenomenon where property values near a new Starbucks went up faster than homes elsewhere — a signal that the neighborhood was on the rise.

New research suggests we might now be witnessing the opposite: the Starbucks Exit Effect, if you will. And the news might not be great for homeowners in affected neighborhoods.

I wrote recently about how the fact that Starbucks is closing in my old Washington, DC neighborhood hit me a bit more emotionally than I might have imagined—especially in the context of Starbucks closing literally hundreds of locations across the country.

Now, analysts are starting to examine what these closures mean for the surrounding real estate markets. The findings aren’t great, but they’re also more nuanced than you might imagine.

The reverse correlation

Hannah Jones, senior economic research analyst at Realtor.com, explains that while Starbucks closures won’t tank property values immediately, they do signal something concerning: weakening demand, reduced walkability, and shifting neighborhood dynamics.

This is especially true when multiple Starbucks locations close in city cores or densely built commercial corridors — the very places where Starbucks traditionally thrived.

The metro areas with the most closures? Philadelphia, Northern Virginia, Baltimore, and my old home in Washington, D.C.

In Philadelphia alone, five stores recently shut their doors, sparking protests from current and former employees.

Chickens and eggs

Here’s where it gets interesting. You might remember that the original Starbucks Effect was always a bit of a chicken-and-egg situation.

• Did Starbucks cause property values to rise?
• Or was Starbucks just really good at identifying neighborhoods that were already on an upward trajectory?

Jones has a pretty definitive answer to that debate: Starbucks opens stores in neighborhoods where economic growth, rising demand, and increasing property values are already underway.

But it’s part of a flywheel. The presence of a Starbucks, she explains, adds to the other factors that convinced the company to open there in the first place.

So, when Starbucks leaves, it can reverse that perception, signaling a decline in foot traffic or consumer demand.

How bad could it get?

Todd Drowlette, a real estate expert who once served as the youngest exclusive broker for Starbucks scouting new locations, offered a sobering perspective on what happens when the closures pile up in the same Realtor assessment.

One closure might not cause lasting damage, he says. But if a neighborhood starts seeing two or more Starbucks shut down, it could begin a downward spiral that hurts surrounding property values.

Starbucks also no longer carries the exclusivity it once did, Drowlette points out.

When a Grande latte costs close to six dollars at some locations, the brand’s ubiquity has diluted its signaling power.

Still, convenience matters. People want amenities within a close distance, and the departure of a major brand like Starbucks creates ripple effects in the local real estate market.

The post-pandemic reality

Key point: Some of these locations might have been viable when downtown activity was higher before the Covid-19 pandemic — think office workers, commuters, shoppers — but they’re more vulnerable now if that traffic hasn’t fully rebounded.

Granted, Starbucks CEO Brian Niccol says Starbucks expects to end the fiscal year with nearly 18,300 stores across the U.S. and Canada.

I mean, that’s still a lot of Starbucks.

Anyway, once more I note that while I wrote almost an entire book in that Washington, D.C. Starbucks, the truth is that I live just as close to another Starbucks now – one that isn’t on the closing list, as far as I can tell – and yet I doubt I’ve set foot in it a dozen times over the past decade.

Thus, I doubt there’s any reason to panic about your neighborhood if you’re a homeowner near a Starbucks that’s closing.

It’s disappointing, of course. But, when does it ever help to panic?

Still, if you start seeing multiple closures in your neighborhood’s commercial corridors, it might be a warning sign.

Was the Starbucks Effect really ever about the coffee? I think it was about what Starbucks represented about the neighborhoods it was in—neighborhoods with enough affluence, foot traffic, and community activity to support a premium coffee shop.

And, I might add, at least a few authors and other creative types looking for places to work.