The meanings of autumn: leaves turning beautiful colors, temperatures cooling, and … pumpkin spice lattes at Starbucks (and almost everywhere else in the coffee universe).
Yes, PSL, the official nickname, is coming back this week. But devotee or not, people in CRE might ask if they should pay some attention to it. Anything that brings many consumers in to buy for such a long stretch — PSL turns 20 this year — would seem to mean more foot traffic, which might improve surrounding retail performance.
Web data scraping company ScrapeHero pulled together some data about 16,061 Starbucks locations in the U.S. Moody’s Analytics put that together with 2023 Q2 vacancy rates and Q2 quarter-over-quarter asking rents and said that “it would be very difficult to conclude that there is a relationship between the number of Starbucks locations and rent performance with only Las Vegas and Seattle beating the national average.”
Not terribly surprising if you’re looking for evidence of a specific boost from PSL days, as they would happen in the latter part of Q3.
However, when comparing average Q3 rent growth with national average quarterly rent growth, there seems to be something. “When looking at average quarter-over-quarter rent growth, the relationship between the number of Starbucks locations and rent performance seems stronger and perhaps a stronger relationship between the PSL season and rent performance,” Moody’s said. “Of the nine cities with the most Starbucks locations, six have outperformed the nation for average quarter-over-quarter rent growth.”
Moody’s also looked at the statistical correlation between the list of Starbucks stores and average Q3 quarter-over-quarter rent growth at 0.88, which would normally be considered a significant level.
That still leaves questions. As Moody’s put it, which came first, Starbucks or rent performance? “Starbucks has a strategic, data-driven approach when selecting a location by analyzing store data and customer behavior to even foot traffic patterns,” Moody’s wrote. “Starbucks could very well be looking into demographic/geographic data and economic/market data in order to position themselves in markets with high foot traffic and strong retail performance.”
It would also be wise to consider a number of other things. One, to really look at a correlation, you’d ideally want to look at how much of one there was historically. Another would be to look at the distribution of rent improvement on a weekly basis to find if there was a close relationship between PSL and rent increases. Then there is the potential of a confounding factor that might be connected to both but more of an actual cause.
And was there never a correlation between rent increases and third quarters before the onslaught of PSL?
But, if PSL does help drive increased rents, does it mean that groceries should convince Hormel Foods to run that pretty clever 2019 Pumpkin Spice Spam promotion?
Let’s hope not.