For apartment dwellers, the new must-have building amenity isn’t a rooftop terrace or a fancy fitness room but a nice grocery store on the ground floor. According to a new study, renters are willing to pay around 6% more to live above a Whole Foods or Trader Joe’s.
Conducted by RCLCO Real Estate Advisors, the study looked at 64 apartment buildings in 20 different metropolitan areas across the U.S., including 31 with a ground-floor Whole Foods, 15 with a Trader Joe’s, and 18 anchored by other premium grocers. Compared to the rents of nearby apartment buildings, those with a Whole Foods or Trader Joe’s on the ground floor pulled in rents that averaged 5.8% higher. Some, such as apartments above Whole Foods stores in Houston, Philadelphia, St. Louis, and Nashville, saw rent premiums as high as 8% or 9% compared to neighboring buildings. (The report’s average removed some outliers, including an apartment building above a Whole Foods in Indianapolis that had rents more than 38% higher than nearby buildings.)
For comparison, the study looked at rents in two to five nearby apartment buildings to the ones anchored by a premium grocery store, selecting buildings with comparable age, scale, and quality. Though the comparisons aren’t exact, they do show that the presence of grocery stores has an effect.
These latest figures are a follow-up to a previous study conducted in 2016 that found rents were affected by what RCLCO called the “Whole Foods effect.” Then, the presence of either a Whole Foods or a Trader Joe’s had a significant but smaller impact on rents, raising them 4.3% and 3.2%, respectively. As the more recent study shows, Trader Joe’s appears to have caught up.
And these two chains aren’t the only ones leading to bumps in apartment rents. Other grocery retailers have similar, if slightly smaller, impacts on rent premiums. According to the latest report, apartments with other premium grocers on the ground floor have rents that average 3.3% higher than neighboring buildings.
RCLCO’s study suggests that real estate developers would be wise to consider adding grocery stores to their apartment projects, tapping into a growing interest in urban living that doesn’t require traveling long distances to meet daily needs. The report also suggests that these ground-floor grocers lead to stronger growth in rents over time, though the numbers are more anecdotal than statistically significant.
This latest study was conducted in April, so the impacts of the pandemic aren’t incorporated into the numbers. But with lockdowns, restaurant closures, and more people working from home, it’s hard to imagine that living above a grocery store would become less appealing. And whatever the conditions, proximity to food is unlikely to become a negative for apartment hunters. Whenever pandemic conditions ease up, people will still need their groceries.