Trader Joe’s is a popular grocery store chain with over hundreds of stores across the United States (and I f*cking love their cheese options). It is known for its affordable prices, private label products, and friendly customer service. However, Trader Joe’s has also gained a reputation for having an impact on real estate prices in the areas surrounding its stores. This phenomenon is known as the “Trader Joe’s effect,” and it has been studied by economists and real estate experts.
This is possibly one of my personal favorite topics to bring up to clients since I am a huge fan of this theory and Trader Joe as a brand itself.
What is the Trader Joe's Effect?
The Trader Joe’s effect refers to the increase in real estate prices that occurs in neighborhoods with a Trader Joe’s store. The effect is not limited to Trader Joe’s, as other popular grocery chains such as Whole Foods and Wegmans have also been found to have a similar impact. However, Trader Joe’s is often used as a reference point in studies because of its widespread popularity and the fact that it has stores in both affluent and less affluent neighborhoods.
The Great & Positive Effects of Living Close to a Trader Joe
One study conducted by real estate data firm ATTOM Data Solutions found that homeowners near a Trader Joe’s store saw an average increase in home value of 5% from 2014 to 2019. This was compared to a 3% increase for homeowners near a Whole Foods store and a 4% increase for homeowners near a ALDI store. To some readers, this may come as a surprise but at the same time, I do believe this should be a common knowledge when it comes down to house-hunting.
Here’s a few other advantages of the Trader Joe’s Effect:
- Economic growth: Trader Joe’s stores can attract foot traffic and other businesses to the area, which can lead to job creation and economic growth. This can have a positive impact on the local economy, which can in turn drive up demand for housing.
- Increased community engagement & amenities: The presence of a popular grocery store like Trader Joe’s can help build a sense of community and increase social interactions between residents. The stores are also often located in areas with other desirable amenities, such as parks, restaurants, and cultural attractions. This can make the neighborhood more attractive to residents and visitors alike.
- Access to healthy food options: Trader Joe’s is known for its affordable prices and emphasis on healthy food options. This can be particularly beneficial for residents of low-income neighborhoods who may have limited access to fresh and healthy food options.
Yes, Trader Joes are more than just selling great cheese options!
The Not-so-positive (and perhaps unintentional as well!) Consequences of the Trader Joe’s Effect
Even though there are numerous positive things that we’re all big fans of this effect, unfortunately there are also some consequences coming along. Either it’s intentional or unintentional, it’s really up to us on how we choose to see things. With that being said, here’s a few downfalls of having a Trader Joe’s in your area:
- Higher housing costs & gentrification: The increase in property values will also lead to higher housing costs, including higher rents and mortgage payments, especially for the new homeowners and renters in the area. This can make it difficult for renters and low-income residents to afford to live in the area, which leads to gentrification. This is indeed one of the biggest pitfalls of city planners for putting a major property value booster into the area. Either it’s their intentions or not, we simply don’t have any concrete evidences to prove so.
- Increased traffic and congestion: The presence of a popular store like Trader Joe’s can lead to increased traffic and congestion in the neighborhood. This can make it more difficult for residents to get around and can create safety concerns for pedestrians and cyclists. Yes, I personally do hate driving to a Trader Joe because I, like many people out there, hate traffic very very much.
- Small business displacement: Considering a major corporate and a very familiar household brand, Trader Joe stores usually increase economic activity around their locations. Subsequently, it can also lead to the displacement of small businesses that are unable to compete with the larger chain store. This can lead to a loss of diversity in the local economy, especially the ones consist of small & medium business owners.
Conveniences always come with a price for both long-term and short-term approaches. And sadly, our beloved Trader Joe is not an exception when it comes down to its impact on any local economy.
Why is it important to understand the Trader Joe's effect as homebuyers / investors?
The Trader Joe’s effect is important because it highlights the complex relationship between businesses and real estate prices. It shows that businesses can have a significant impact on the economic and social fabric of a neighborhood, and that this impact can manifest in ways that are not immediately obvious. The Trader Joe’s effect is also important because it can have both positive and negative consequences. On the positive side, it can lead to increased economic growth, job creation, and property values. On the negative side, it can lead to gentrification, displacement, and a lack of affordable housing.
For city planners & mayors (thank you to Garden Grove’s Mayor, Mr. Steve Jones), understanding the Trader Joe’s effect is important for policymakers, urban planners, and community leaders because it can help them make more informed decisions about how to allocate resources and plan for the future. For example, if a community is considering whether to approve a new Trader Joe’s store (or any other major upscale convenient stores), they may want to take into account the potential impact on housing affordability and the need for affordable housing in the area.
Alternatively, if a community is experiencing a wave of gentrification and displacement, they may want to consider implementing policies that protect renters and low-income residents. By understanding this effect, policymakers and community leaders can make more informed decisions about how to promote economic growth and development in a way that benefits everyone in the community.
In Conclusion
At the end, the Trader Joe’s effect is a real phenomenon that has been studied by economists and real estate experts, which I personally love to discuss and inform all of my clients so they can truly understand (partially) why home prices are the way they are in certain areas.
While it can lead to an increase in property values and economic growth, it can also have negative consequences for renters and low-income residents. As neighborhoods continue to evolve, it is important for policymakers and community leaders to take a comprehensive approach to urban planning that takes into account the needs and concerns of all residents.
So for your next homes, would you consider living close to a Trader Joe’s a mandatory requirement?
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