New museums and art districts not only prompt new cultural and commercial development in an area—they also have the potential to make nearby real estate values surge. Indeed, property values of homes near new museums can surge between 20 percent to 50 percent over a period of five years, according to a new study from Stephen Sheppard, an economics professor at Williams College in Massachusetts.
Sheppard refers to this as the “Bilbao effect,” named after Bilbao, Spain, which became a global international arts and luxury real estate destination after it opened the Guggenheim art museum in 1997. “Museum developments enhance neighborhoods and boost the value of real estate nearby,” says Sheppard.
U.S. cities like Bentonville, Ark.; North Adams, Mass.; and Chattanooga, Tenn., have all experienced this phenomenon, according to an article in The Wall Street Journal.
For example, Chattanooga’s Hunter Museum of American Art and growing art district are reshaping the city’s residential downtown area. Developers have been rushing to buy teardowns and add new single-family homes and townhomes. “Anything within a 15-minute walk of Hunter has just blown up,” Geoff Ramsey, president of the Greater Chattanooga Association of REALTORS® told the Journal. Case in point: The average sales price of homes less than a mile from the museum was $573,000 in July—up from $271,100 in July 2016, according to MLS data.