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Where's life happening tomorrow? Influence of the gastronomy offer on real estate prices

  • Data Insights
Published by Price Hubble a month and 2 weeks ago
Hipster coffee effect

The location is the central factor influencing real estate prices. But what makes a good location? And how can future developments be deduced from the current situation? In a study, PriceHubble shows how innovative indicators can be used to find answers to these questions. 

Real estate investors, project developers and other market participants, as well as city administrations and tenant representatives, have always been intensively involved in processes of change that lead to districts and residential quarters becoming more attractive - either in order to deduce where investments could be particularly profitable, or to initiate urban planning measures. This is an extremely complex and arduous undertaking, since such changes, so-called gentrification, are usually only reflected in economic indicators at a very late stage and a precise qualitative analysis of the individual locations is therefore necessary. The aim of this study was to show that the use of new data sources can help to identify such processes more easily and earlier in order to understand them better.

Therefore, we look at the influence of online restaurant ratings and new café openings on rental prices. Online evaluations provide information not only about the quantity and quality of local gastronomic supply, but also about the type and extent of gastronomic demand. New gastronomy openings can be used to investigate effects over time.

Influence of gastronomy on real estate prices in Zurich

In order to investigate the effects of online gastronomy evaluations, profiles and evaluations of the online platform TripAdvisor for about 1,700 restaurants in Zurich (survey period: 7/2018 - 4/2019), approx. 9,000 rental offers for apartments in Zurich from various online portals (same survey period) were analysed. For each rental offer, variables such as the number of restaurants within a radius of 500m, the average number of ratings per restaurant within a radius of 500m, restaurant ratings, rental offers in the surrounding area and the distance from the city centre were derived. Regression analyses were partly used to investigate the relationships. 

Many gastronomic online ratings suggest higher prices

The dynamics of real estate prices can be derived from dynamics in the gastronomy sector. The rents of apartments in areas with many online restaurant ratings are noticeably higher than in areas with few ratings. 

Example: Based on an average apartment (77 m²) in Zurich, an increase in the average number of valuations per restaurant within a radius from 20 to 80 it can be assumed a rent increase of CHF 1.30/m² or CHF 99 per month with otherwise the same location and apartment properties. This corresponds to an increase of 5.0 % with an average square metre price of around CHF 29.80 - resulting additional costs for a tenant per year: approx. CHF 1,192. 

Correlation between restaurant density and average rents

There is a high correlation between restaurant density and average rents, as well as restaurant density and centrality: as expected, restaurant density tends to be higher in more central and more expensive locations. If the analysis is adjusted for individual residential properties, centrality and local average rents, however, there is a slightly negative effect on restaurant density: with a density of 60 instead of an average of 28 restaurants in the surrounding area, a rent reduction of around CHF 0.83 / m² is to be expected with otherwise the same environment characteristics.

Hipster-Cafe-Effect in Switzerland

The latest results of one of our studies show a clear correlation between newly opened innovative cafes and rental price developments in Switzerland. A very interesting article published in the Handelszeitung describes these market findings very well and shows additionally specific places in Switzerland where an investment could be interesting.

Hipster effect graph
Hipster coffee effect

For the study, our data experts analysed 540.000 offers during a 15 year period (2004 until February 2019) and a set of randomly selected innovative cafes across Switzerland. They found that rent prices of properties close to newly opened innovative cafes increased on average by 6.1% during a three year period. This is 2.4% faster than the average increase in the corresponding city. A reference test, which tested for the same effect when considering McDonalds restaurants, did not show any significance.

Conclusion

Whoever wants to find out the future potential situation earlier than the competitor or wants to obtain information on centrifugation dynamics should use the latest analysis methods and identify new, innovative indicators. An important factor has been investigated by PriceHubble: The gastronomy offer. Based on the development of the gastronomy offer, developments in the real estate market can be derived to a certain extent, because indicators such as online restaurant valuations and café openings are related to apartment rents. These signals are highly relevant for developers, investors or local politicians. 

Would you like the complete study? Please contact our media department.

PriceHubble includes innovative factors for real estate valuations in its digital solutions. If you are a real estate professional and  interested in testing our product, contact us for a demo access!


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Hipster coffee effect
Where's life happening tomorrow? Influence of the gastronomy offer on real estate prices

The location is the central factor influencing real estate prices. But what makes a good location? And how can future developments be deduced from the current situation? In a study, PriceHubble shows how innovative indicators can be used to find answers to these questions.

  • Data Insights
Read more →
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