A number of global cities have found that new museums and art districts not only usher in new cultural and commercial development, but also boost the real estate values of nearby homes.
The phenomenon is known as the “Bilbao effect”, named for the once-industrial city of Bilbao, Spain, which has become an international arts and luxury real estate destination since the opening of the Guggenheim museum in 1997. According to Stephen Sheppard, an economics professor at Williams College in Massachusetts, property values of homes near new museums can rise between 20% and 50% over the course of five years.
Real estate professionals have observed the “Bilbao effect” in a number of U.S. cities, including Bentonville, Ark., North Adams, Mass., and Chattanooga, Tenn.
The Hunter Museum of American Art and growing arts district have reshaped the residential landscape downtown, says Geoff Ramsey, president of the Greater Chattanooga Association of Realtors.
In the past few years, developers have been buying teardowns to build new single-family homes and townhouses, he says. “Anything within a 15-minute walk of the Hunter has just blown up,” he says. The average sale price of homes with .75 miles of the museum was $573,000 in July 2018, compared with $271,100 in July 2016, according to MLS data.
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