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We all know the classic Walmart tale: Waltons move in, drive mom and pop stores out of business, reduce total jobs, depress wages, and ultimately, hurt property values. But new data suggests that Walmart may not be as bad for local real estate markets as once thought—the question is, does that hold true for real estate agents as well?
Using over a million housing transactions located near 159 Walmarts opened from 2000-2006, a National Bureau of Economic Research study has found that a new Walmart store actually increases housing prices by between 2 and 3 percent for houses located within ½ mile of the store and by 1 to 2 percent for houses located between ½ and 1 mile.
Nevertheless, before Realtors start singing praise of so-called “big box” stores like Walmart, let’s look at a few key details.
What about old stores?
Note that the NBER study covers only Walmarts, and more specifically, only new Walmarts. Of all the big box chains, Walmart is probably the strongest when it comes to staying in business a long time. But while Walmart may be healthy, several other chains are battling with online retailers like Amazon for survival. Best Buy, for instance, plans to close 50 locations by the end of 2012. Others, like Borders, have folded entirely. This begs the question: What happens to a community when a big box chain that’s been in town for years decides to move out?
Well, for one, big box retail spaces are notoriously difficult to resell—first, because of their huge size, and second, because most have been built to very precise corporate specifications. In fact, most companies would rather rebuild their new spaces from scratch than purchase an existing space and retrofit it. (When asked how to deal with tons vacant big box space, a developer in Chicago famously replied, “Start a demolition company.”) That’s all well and good when the brick and mortar retail business is healthy. Sadly, it isn’t.
Naturally, this affects commercial agents, who are struggling to resell top-tier retail locations, let alone less desirable ones. In metro Phoenix, for instance, empty big boxes of 10,000 square feet or more represent almost half of the total vacant retail space. Vacancies also affect residential agents, who have difficulty reassuring buyers when they see long-vacant, boarded-up commercial spaces all over town.
The NBER study also doesn’t cover rural areas for which residential property data doesn’t exist. This is significant when you consider that 90 percent of U.S. territory qualifies as rural, and a huge percentage of rural areas are now served by Walmarts. Again, Walmart may be in decent shape, but similar retailers (i.e. Kmart) are facing hundreds of store closures. It’s rural areas where people’s options for working and shopping are most limited to begin with, and it’s these areas that would be hit hardest by retail vacancies. After all, in a sluggish economy and the age online shopping, why should Walmart open a store in a town of 2,500 people?
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Your town? More like any town
There are also important intangibles to consider aside from property values. Regardless of its actual effect on home prices, the existence of a Walmart in a community often has a negative news effect, which may prove challenging for some realtors to address. (This is particularly true of more affluent areas, where anti-Walmart sentiment is something of a “luxury.”)
Furthermore, big box stores like Walmart decrease the diversity of experiences people in adjacent areas can have when it comes to getting the products and services they need, which in turn homogenizes the community. In other words, Walmarts make towns more like other towns with Walmarts. This, in turn, affects the appeal of your community relative to others when it comes to homebuyers. Whereas your town used to have businesses that gave it a distinct flavor—a kooky children’s clothing store, a unique jewelry shop—now, it just has Walmart.
This also makes Realtors’ jobs harder by limiting what they can do to distinguish themselves from other agents. Online marketing is hugely important in the modern real estate business, but one of the best ways to separate yourself from the pack hasn’t changed: be an expert on your community. In the age of Walmart, this is much more difficult to do. After all, when Walmart is the only place to work, eat, shop, and, well, go, how much expertise could you possibly demonstrate about the towns you’re working in?
Whether you think Walmarts are good or evil, most communities can do little to resist them. Nevertheless, some communities have managed weather the Walmart dust bowl. A follow-up to a landmark 1988 study about Walmarts in Iowa has found that many small towns have stabilized economically, in large part thanks to savvy small business owners who, instead of competing with Walmart, have shifted their focus to specialty products and services that big box stores can’t provide. A new golden age for Radio Shack? Probably not. Hope for small towns and the real estate professionals who serve them? Absolutely.
