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Local study finds proximity to amenities
by: L.E. Baskow, JIM CLARK,

You can call it the New Seasons Effect, or the Whole Foods Effect, but developers and city planners have talked about it for years. In short, nothing says you've arrived as a neighborhood quite so emphatically as a New Seasons specialty grocery store down the block.

And now there's evidence showing how much that upscale grocery means to Portland-area property values - an extra 20 percent or so for homes within a block and a half, according to a study by local economic consulting firm Johnson Gardner.

Everything else being equal - same home, same neighborhood - if a specialty grocery store sits within a block and a half of your house, your property values should be 20 percent higher than if you don't have the store nearby.

And specialty groceries aren't even No. 1 on the list of shops that will elevate the value of nearby homes. That distinction belongs to small neighborhood movie theaters, according to the Johnson Gardner report.

All things being equal, a small movie theater can raise property values somewhere between 14 and 30 percent, according to the study. Wine bars and garden shops also provide a boon to homeowners. Bookstores, fitness centers and bike shops do the same, to a lesser extent.

Jean Lea is a believer.

'It's a huge perk,' Lea says, of living directly behind the Sellwood New Seasons for four years.

And the nearby Moreland Theatre, she says, clearly has affected the neighborhood. 'It seems so quaint to be able to walk to a movie theater at night, because then you know you'll be able to walk to lots of restaurants, too.'

Study used 2006 numbers

The 2007 Johnson Gardner study also found some downsides. It found two types of stores associated with lower property values - day spas and CD and record stores.

Some developers apparently had this figured out all along. Metro planners commissioned the study after learning that a local developer had begun asking 20 percent more for condos in the Southeast Portland project he was building - based on rumors that either a Whole Foods or New Seasons was going in next door.

Agencies wanted hard numbers on which types of stores increased property value, and how much, said planner Megan Gibb, manager of Metro's transit-oriented development program, which commissioned the study.

The study was based on 2006 housing sales, which brings up a semi-disclaimer.

That was the year housing prices hit their peak in Portland, and things have been stagnant, or declining, pretty much since then.

But Bill Reid, an economist at Johnson Gardner, said while the 'amenities effect' may be a bit tamped down in a slow market, he expects them to reassert themselves when the housing market rebounds.

Reid said researchers looked at all 2006 home sales in the Sellwood, Division-Clinton Street and Multnomah Village neighborhoods of Portland, the Murray Scholls neighborhood in Beaverton, and in Lake Oswego. They compared sales of equivalent homes and condos near and distant from different types of shops. After compiling the sales data, Reid said, researchers interviewed developers to make sure their findings coincided with what developers intuitively had observed.

Reid said he's fairly confident about most of his findings, especially the influence of specialty groceries and movie theaters. Smaller tenants, such as wine bars, which the study showed could raise nearby property values between 11 and 21 percent, were more difficult to assess, Reid said, because there were fewer of them in the study. That same qualifier might apply to the negative effect from day spas and CD and record stores, Reid said.

Damin Tarlow, development manager at Gerding Edlen, one of Portland's largest development firms, said he believes in the underlying ideas behind the Johnson Gardner study, but is not quite sure about the reliability of its numbers.

Tarlow wonders if it's possible to parse out the effect one store has, when a neighborhood consists of such a mix of amenities.

Gerding Edlen brought in Whole Foods as an anchor in its Brewery Blocks development in the Pearl District, and Tarlow says it clearly has helped nearby property values.

'But could you quantify the effect Whole Foods has, the effect Anthropologie has, the effect P.F. Chang's has?' Tarlow said. 'The fun of real estate is yes, numbers drive a lot of things, but at the end of the day, so much is art, so much is science. I've seen little tiny restaurants change neighborhoods.'

Parking makes the difference

The overwhelming impact of neighborhood theaters probably is the most surprising finding in the Johnson Gardner study. But Reid said a theater such as Cinema 21 in Northwest Portland can have a tremendous effect on everything around it.

'A movie theater really changes things for a district because it changes the length of time during the day a district is open and active,' Reid said. 'With a movie theater, your daytime district all of a sudden is a great location for restaurants and other activities at night. It turns it from an eight-hour district to a 14- or 16-hour district.'

And most neighborhood movie theaters don't include parking lots, which Reid said is a bonus because parking lots encourage more moviegoers from outside the neighborhood. Day spas, on the other hand, may be associated with lower property values in the study, Reid said, and parking might be the reason.

'Residents of a district might like the idea of a spa there,' Reid said. 'But chances are the majority aren't going every day, and if the spa has a great reputation, it's going to attract a lot of (undesirable) traffic and parking by nonresidents.'

Another surprise in the study, Reid said, was that brewpubs did not appear to help housing values. 'The brewpub isn't necessarily the same amenity it once was,' he said.

Gourmet bakeries were the same - not much help. Reid said some large bakeries might not be desirable neighbors because of early-morning truck traffic.

Not everybody is convinced of the validity of the Johnson Gardner numbers. Brian Rohter, chief executive officer of New Seasons Market, said it doesn't make sense to him that homes within two blocks of his stores escalate in value.

In fact, Rohter said, it would make more sense if the homes were another block or two away - within walking distance but not so close. Rohter says that some neighbors have complained about spillover traffic from stores, including people looking for parking.

Gibb isn't so sure. 'People might complain, but that might be different than home values going up,' she said.

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Study already affecting decisions

The consultant's study showing how different amenities affect property values already has had an impact on the way business is conducted in the Portland metro area, according to Metro planner Megan Gibb, whose department commissioned the report.

'We've had developers say they've been able to take the study to the bank to help them get financing because they could say, 'These amenities are in place,' ' Gibb says.

In fact, an entire development has taken place as a result of the study, performed by local economic consulting firm Johnson Gardner, that otherwise wouldn't have gotten off the drawing board.

When developer Denzil Scheller proposed renovating an abandoned, historic movie theater on property owned by the city of Hillsboro in its neglected downtown, Hillsboro economic development manager John Southgate got in touch with Metro. Metro decided to provide $250,000 to help the project along.

Metro planner Gibb said the funds, from a program designed to encourage housing along MAX lines, would not have been available for the theater rehab before the Johnson Gardner study suggesting that a movie theater would increase the value of nearby housing more than any other type of business.

Portland-area home sales plummet

Having a New Seasons or Cinema 21 nearby might increase the value of your home. But it still can't immunize it from the housing slump that has seen Portland area home prices drop more precipitously than anytime since the Great Depression of the 1930s.

Portland area home sales between January and August fell 33.9 percent compared with the same period in 2007, according to the latest statistics from the Regional Multiple Listing Service.

The average sale price in August was down 6.7 percent from August 2007, which is likely the steepest year-over-year decline in 70 years, according to Gerard Mildner, director of the Portland State University Center for Real Estate.

The last time the average price of Portland area homes declined so consistently over an extended period of time was between 1982 and 1985, Mildner says, when the price of housing dipped about 4 percent over the three years.

Before that, housing prices had pretty much increased steadily since the Depression, Mildner says, when national housing prices declined about 30 percent over a 10-year period. There are no reliable local housing statistics going back that far.

While some local economists aren't as certain about the local housing market hitting bottom yet, Mildner says he believes the worst is likely over. He says that the Portland metro area's land-use planning regulations, specifically the urban growth boundary, have dampened housing starts enough so that Portland is not as overbuilt as many other parts of the country.

Mildner also says that the run-up in housing prices here didn't take place over as long a period of time as it has in many areas in California, where year-to-year housing prices are now off about 25 percent.

As a result, he says, Portland home buyers were not so conditioned to the idea that housing prices would always increase, and so haven't as widely turned to exotic loan programs that are now yielding high numbers of defaults.

'I don't think we're going to go down much locally anymore,' Mildner says. 'We've probably taken our hit.'

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