WASHINGTON, DC—Everyone knows about the Whole Foods effect. Once the high-end grocery decides to build in a neighborhood, the submarket is set. There is an assumption that Whole Foods is building in an area where consumers can afford its higher prices. This assumption is then taken on by developers who become markedly more enthusiastic about residential projects nearby. The sentiment was best summed up by Mitchell Schear, president of Vornado/Charles E. Smith in an earnings call back in 2013 when the REIT announced it had landed Whole Foods to anchor a mixed-use project in Pentagon City, VA.

He said:

"Signing the lease with Whole Foods is a home run by any measure for the project and the neighborhood. Whole Foods has a history of increasing value to its surrounding neighbors, which we fully expect will happen here where we own two big parcels of adjacent land that will surround Whole Foods."

No doubt for a submarket like Pentagon City, this is very true. But Whole Foods has been expanding into emerging parts of the city, such as the H Street Corridor and further into the suburbs, such as Prince George's County. Does this equation Whole Foods=Increased Value in the Neighborhood hold true in these areas?

Yes, in the abstract. But just try to pin down a broker on tangible numbers.

Ravenswood Apartments

Earlier this summer Ravenswood Apartments, a 23-unit multifamily community located at 4701-4703 Ravenswood Rd in Riverdale, MD, traded, sold by Wright Properties. The buyer was a local LLC, Dumbarton at Riverdale Station LLC.

The Ravenswood is a boutique apartment building and while it is not part of the, say, bustling H Street Corridor scene, it is close enough to some nice amenities including Prince George's first Whole Foods, less than half a mile away.

GlobeSt.com asked one of the brokers on the deal, Greysteel's John Mullen, how much did Whole Foods' proximity play in the deal? The answer: not as much as you'd think for the bottom line but it still had an important influence.

"It made a better story for the future usage of the property," he said. "But not in the sense that there was anything to quantify." However, properties in this submarket are your standard-fare suburban multifamily accommodations ("they are what they are" Mullen said) and there is little reason to pay more than exactly where they pencil in in terms of value and cash-flow.

Having a Whole Foods nearby "created more buyer interested because of what it indicates about the income level, but ultimately buyers are going to do their own numbers and due diligence," Mullen said.

Elysium Logan

One reason Grosvenor Americas was intrigued with Madison Investments' Elysium Logan, a residential property located at 1427 and 1429 Rhode Island Ave, NW, was its proximity to Whole Foods.

Elysium Logan will be an eight-story building with 32 luxury residences in the Logan Circle/14th Street corridor. The description of the building and units screams luxury, or at least a high-end abode for the discerning renter.

Grosvenor Americas provided $5.77 million in financing for the project.

"There is absolutely a 'Whole Foods effect,' Scott Brody, senior vice president at Grosvenor Americas, tells GlobeSt.com.

"People want to live near coffee house and grocery stores. It adds to the appeal of a neighborhood."

But Brody didn't sign on the bottom line simply because he heard a Whole Foods was en route. He participated in past projects in the neighborhood and is very familiar with the market and how it has been on a rocket climb.

"This was a proven area for us when this deal with Madison came up," he said.

"Whole Foods just solidified the decision for us." "Having a Whole Foods nearby is a tacit endorsement of the neighborhood," he said. "The fact that it is building there shows now what the neighborhood is today but it will be in a few years."

Instant Insights /

Does the 'Whole Foods Effect' Work In Every Neighborhood?

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