Research shows that Costco openings can have an impact on nearby property values, especially in already densely populated areas.
Few brands have the kind of legendary devotion that Costco has cultivated over the past few decades. Shoppers love the bulk deals, the store’s Kirkland Signature products, and the cheap hot dogs—which is why any given Costco parking lot is likely to look like a zoo whenever you visit, especially in this economy.
A Costco run can be good for your wallet, if you like buying honey by the bucket or gumballs by the hundreds. But the benefits may go beyond that: According to research from the Vancouver School of Economics, Costco openings can have an impact on nearby property values, especially in already densely populated areas.
That’s some great potential upside for homeowners and potential buyers. Just keep in mind that living close to any high-traffic amenity comes with its own trade-offs, such as more cars, more noise, and more foot traffic on the weekends.
What Costco means for home values
In the abstract, living within a short driving distance of Costco is a good thing. But can you put a number on it?
Silas Kwok at the Vancouver School of Economics conducted research on this question. It turns out that the overall impact of living near a Costco is negligible.
In looking at Costco openings from 2002 to 2020 across the U.S., the research showed that the openings “caused no significant changes in property values on average.”
That said, there were certain parts of the country where Kwok finds Costco did drive values—namely, in high-density and high-income areas.
“Costco openings caused a 7.9% increase in property values within 5 miles in counties with above-average population density, and a 5.2% increase within 5 miles in counties with above-average household income 2.5 years following store openings,” writes Kwok.
Consider a Costco opening in a dense, high-income area like Brooklyn, NY, versus one in a lower-density, lower-income market like Birmingham, AL. The research suggests the first is more likely to see a bump in nearby property values than the second.
There are a few possible reasons for this. One is that wealthier Americans tend to prefer Costco, according to YouGov, and may be willing to pay for easy access to it on a regular basis. Another is that Costco simply brings more value to people’s lives than the typical big-box store.
“A Costco nearby equals convenience and savings in the minds of many consumers. A household can join a Costco and go get gas for their car, groceries for their home, and holiday decorations all in one trip. Not to mention there is likely an optometrist and even a section to get new tires,” says Christina Rordam, a real estate agent in the Orlando, FL, area. “Busy families can save hours every month, not to mention cheap gas these days is worth its weight in gold.”
Wealthier Americans tend to prefer Costco, according to YouGov. Does the value come first, or the Costco?
Yet another view of the data is that Costco doesn’t necessarily create value—it confirms what already existed.
“Home values only increased in areas that were already high-density or high-income. That suggests the Costco effect is not universal but is highly dependent on the pre-existing economic and demographic characteristics of a neighborhood,” says Selma Hepp, chief economist at Cotality. “Costco strategically targets areas with specific economic profiles that may already be on an upward trajectory.”
Hepp also contends that some of what makes Costco unique is also what makes living near it minimally valuable.
“Costco functions as a destination store. Its business model is built on a membership base willing to travel, often by car, for less frequent bulk-shopping trips. When you are already planning to drive 15 or 20 minutes, the value of living one minute away is minimal,” she says. “That convenience premium does not get capitalized into the home's price the way it would for a daily-visit amenity like a grocery store or a coffee shop.”
It’s true that a new Costco may simply be part of a larger economic upswing in a given area.
For example, in August, Advenir Azora acquired 18 acres in Franklin, WI—a suburb of Milwaukee—to build a 166 build-to-rent residential neighborhood, spending over $51 million. The biggest perk? It’s near a future Costco.
The mayor of Franklin, John Nelson, says that the Costco will bring a “spark” to the area and potentially attract other large tenants to the area.
That spark may be enticing to homebuyers seeking property in an area that will soon see rising prices, and want the Costco as a vote of confidence in the neighborhood’s economic future. And these days, a quick drive to Costco’s gas station is a true benefit considering the current price of gasoline.
Keep the downsides in mind
As with any amenity, there is a limit to the benefits of being nearby a Costco. Anyone who has ever visited one of its stores on a weekend knows just how busy the parking lot and the surrounding areas can get. And that’s not even the full picture.
“When we evaluate a house that backs up to or faces a big-box site, we have to price in what the next buyer will feel: delivery trucks before sunrise, parking lot lights at night, weekend traffic, and a backyard view of a loading dock,” says Andy Kravchenko, founder and CEO of Sterling Home Offer. “The sweet spot is being minutes away, not next door.”
If a Costco moves in nearby, be prepared for the potential for noise, light pollution, and loss of neighborhood feel. These can be real downsides to living, and buying, nearby.
How close should you live to a Costco?
The clearest takeaway from Kwok's research is that living near a Costco is more of a boon in high-density, high-income areas than elsewhere. Whether that applies to any specific house is still a case-by-case question, and Kravchenko recommends doing some on-the-ground homework before deciding.
"For buyers weighing it, visit at the ugly hours, 6 a.m. on a delivery day and Saturday noon. Stand in the backyard and listen. Then pull up the county parcel map and check the undeveloped commercial land nearby, because today's green buffer can become tomorrow's expansion," he says. "If the house passes those tests, being close to a Costco is a plus that pays you back when you sell."
And if you're not sure a nearby Costco will do much for your home value, it's worth considering how the store actually fits your life, says Rordam.
"Consider how much time shopping there would or would not save you," she says. "If you are a single or smaller household, maybe you won't have much use for those gallon jugs of ketchup or 50 packs of noodles anyway."