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Upscale grocery stores make neighborhoods 'desirable'

Wednesday - 3/14/2012, 10:16am  ET

WASHINGTON - Upscale grocery stores, including Whole Foods and Wegmans, do more than just create excitement when they open in a neighborhood. They also can increase real estate values, studies have shown.

And there's a good chance that when one big company moves into an area, others will follow.

Whole Foods spokeswoman Kate Klotz said the company moves into areas that are already growing, rather than using their stores to attract people to an area.

The high-end market, though, is making what some consider a strange move. Whole Foods is opening in a store in downtown Detroit, close to boarded-up houses and the municipal garbage incinerator, according to The Wall Street Journal.

Stuart A. Gabriel, director of UCLA's Richard S. Ziman Center for Real Estate, calls the company's decision a "chicken-and-egg issue" for real estate because homeowners tend to buy in safe, low-crime neighborhoods. An upscale market in the neighborhood, Gabriel tells SmartMoney, is an indication the area is "desirable."

But the move into inner city Detroit, an area hard hit by the recession, may attract young professionals, Gabriel said.

Detroit's local grocery stores are upset by the company's decision. They say Whole Foods is getting real estate incentives, such as tax breaks that they never received.

Real estate experts counter that the incentives offered to Whole Foods are common when an area wants to attract companies to difficult locations.

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(Copyright 2012 by WTOP. All Rights Reserved.)