Forging the Future: Manufacturing Growth and Its Effects on North American Industrial Markets

The recent experience of pandemic-related supply chain disruptions and continued trade tensions between China and the United States have made just-in-time logistics and sprawling global supply chains less attractive to manufacturers than they once were. Coinciding with this shift, the U.S. federal government has created large new incentives for industries associated with electrification, green energy and strategically important technologies to locate new manufacturing facilities in the U.S. and is investing in infrastructure that will support an expansion of the nation’s industrial capacity. Manufacturers have responded to these incentives by announcing investments in new plants nationwide, reshaping the market for industrial real estate as manufacturing construction accelerates and the pace of new warehousing and distribution projects slows. At the same time, firms are also investing in new manufacturing facilities in Mexico and Canada to increase the speed and reliability of their supply chains.

The NAIOP Research Foundation commissioned this report to examine the trends behind reshoring and nearshoring and to evaluate how related investments in manufacturing are affecting North American markets for industrial real estate and its two largest components: warehousing/logistics space and manufacturing space. The study draws from secondary sources, Newmark market data and interviews with commercial real estate professionals to identify major new manufacturing announcements, quantify related construction activity and evaluate effects on adjacent real estate markets. Findings from this report include:

• Firms in the high-tech, automotive, energy and biomanufacturing sectors are making the largest investments in new manufacturing in the U.S. New construction is expected to expand the footprint of U.S. manufacturing space by 6 to 13 percent over the next ten years.
• New manufacturing plants have been announced in every U.S. state, but investment has been concentrated in Midwestern and Southeastern states. Most new construction is expected to be in secondary or tertiary market locations that can offer adequate supplies of affordable energy and skilled labor.
• Most of the new manufacturing construction will be build-to-suit or owner-built, but demand will also exist for speculative manufacturing space. The expansion of domestic manufacturing is also expected to generate demand for logistics space and other types of commercial real estate in the communities surrounding new plants. The amount of additional demand generated by this construction will vary depending on a project’s sector, existing supply chains and local market dynamics.
• Several of the trends driving onshoring in the U.S. are also contributing to nearshoring of manufacturing to Mexico and Canada, with Mexico attracting the most nearshoring investment. This investment is generating demand for logistics and complementary manufacturing facilities along the U.S. border with Mexico, pushing down vacancy rates and spurring new construction near key border crossings like Laredo, Texas.

Produced in conjunction with Newmark.

Cover Image: Illustration of a planned Intel processor factory in Licking County, Ohio. Graphic courtesy of Intel Corporation.

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