Costco’s Hidden Real Estate Empire: The Costco Effect Explained

Costco transcends its role as a bulk retailer, operating as a major real estate powerhouse in North America. With 640 warehouses in the USA alone and over 100 across Canada, it controls vast sites and drives neighborhood transformations on a continental scale.

Ownership Model Sets It Apart

Unlike most big-box retailers that lease space, Costco buys the land and owns the buildings at about 85% of its over 900 warehouses worldwide. Each typical location spans 14 to 20 acres with around 146,000 square feet of warehouse space, equivalent to roughly two football fields. This asset-heavy approach yields a portfolio valued at $31.9 billion as of late 2025, rivaling many major Real Estate Investment Trusts (REITs).

Ownership provides Costco full control over expansions, layouts, and adaptations without landlord approvals. It also shields the company from rent escalations during inflation, stabilizing occupancy costs and supporting low prices, like the famous $1.50 hot dog combo that has remained unchanged for decades.

The Anchor Tenant Power

Costco acts as the ultimate anchor tenant, drawing massive foot traffic that reshapes surrounding areas. When a new store opens, land values often rise, new commercial plazas emerge, and housing developments speed up, this defines the “Costco Effect.” Studies indicate that openings can boost nearby property values by up to 7.9% within five miles in denser, higher-income counties.

This phenomenon spans borders. Whether in high-growth American suburbs or Canadian hubs like the GTA, the pattern is consistent: steady customer flows enable adjacent landlords to command higher rents, elevating overall property values across the neighborhood.

Gas Stations as Traffic Magnets

Costco’s gas stations operate on razor-thin margins to lure members frequently, funneling them directly into the warehouse. One-way traffic designs and extra-long hoses speed up fueling, cutting wait times and boosting efficiency. This creates a reliable “people-flow engine,” benefiting nearby businesses in both the US and Canada with significant spillover demand.

Lessons for Investors

Spotting anchor tenants like Costco helps identify emerging hotspots before prices surge. In competitive markets across North America, tracking such developments aids smarter investments in commercial and residential properties.

Recognizing that a warehouse opening isn’t just about bulk groceries, it’s a signal of infrastructure growth can be a key advantage for investors. Next time you pump gas at Costco, recognize it powers a real estate ecosystem worth billions.

Disclaimer: The information provided in this blog is for general informational purposes only and should not be taken as professional advice. While every effort is made to ensure accuracy, no guarantee is given regarding the completeness or reliability of the information. Readers should conduct their own research or consult qualified professionals before making any financial, legal, or personal decisions. The views expressed are personal opinions and do not necessarily reflect those of any affiliated organizations.