The Role of Nearshoring and Onshoring in Redefining the Built Environment

As manufacturing operations return to North America, the need grows for commercial real estate that supports localized producation and distribution.

In the wake of global disruptions and the ongoing evolution of supply chains, nearshoring and onshoring have emerged as critical strategies for industries worldwide. This trend is particularly significant in the real estate industry and the broader built environment.

Innovations in nearshoring and onshoring are not just reshaping supply chains — they’re transforming the very fabric of our built environment. As we pivot toward more localized and resilient development practices, we’re creating opportunities for a new era of real estate solutions.

Penn State is dedicated to participating in this new era through the Cocoziello Institute of Real Estate Innovation, launched earlier this year (see feature box below). The institute formalizes the relationship between the diverse subject matter experts at Penn State whose work touches the real estate industry. This article explores the current ecosystem of nearshoring and onshoring and offers insights from Penn State experts associated with the Cocoziello Institute.

A Response to Global Challenges

Nearshoring and onshoring involve relocating business operations, including manufacturing and supply chains, closer to their end markets. This shift has gained momentum as companies grapple with susceptibilities exposed by the COVID-19 pandemic, geopolitical tensions, and the increasing complexity of global supply chains. For the real estate industry, this shift presents both challenges and opportunities that demand innovative solutions.

“COVID-19 unveiled the vulnerability firms have to certain geographic regions due to overreliance on their production capabilities and low cost,” said Johanna Amaya, assistant professor of supply chain management and information systems at Penn State. “This vulnerability, combined with a lack of investment in developing their own capacity, has made companies think about moving operations and sourcing to other areas.”

“Supply chain leaders believe that volatility is omnipresent in the current business context, and onshoring enables localization, which allows firms to be closer to their customers and be more responsive to their needs without suffering from the disruptions that may occur in a longer supply chain,” said Zhenzhen Yan, assistant professor of supply chain management at Penn State.

Amaya also emphasized that simply reshoring without creating capacity at new geographic locations does not solve the problem. It only shifts the blame to a different partner if another major disruption occurs, which is not a sustainable long-term solution. Reshoring alters a firm’s supply chain network structure, as the proximity to suppliers and target markets depends on the new chosen locations for production and procurement. While geographical decisions vary across industries and business contexts, popular destinations emerge each year and reshape the global supply chain landscape, according to Yan.

As companies move their operations closer to home, the need grows for industrial and commercial real estate that can accommodate modern manufacturing facilities, distribution centers and logistics hubs. This demand is reshaping the real estate market, driving the development of new properties and the repurposing of existing ones to meet the needs of nearshore and onshore operations.

“I think elaborating on previous research, it is fair to say that commercial real estate can be designed to promote the formation of industrial clusters, facilitate localization and ultimately promote supply chain resilience,” Yan commented. “In this regard, real estate professionals can collaborate with supply chain managers to make manufacturing location decisions and help with site design.”

The built environment must evolve to accommodate new types of facilities and infrastructure to support nearshoring and onshoring. This includes developing sustainable buildings equipped with the latest technologies to enhance efficiency and productivity. It also involves creating transportation networks and logistics systems that can support the rapid movement of goods within local markets.

Developers, architects and urban planners are being challenged to think creatively about how to design and build properties that meet the unique needs of localized operations. This requires a focus on flexibility, sustainability and technological integration.

Flexible and Adaptive Spaces

One significant innovation in real estate development for nearshoring and onshoring is the creation of flexible and adaptive spaces. These properties are designed to be easily reconfigured, allowing them to accommodate a variety of businesses and industries. Circular economy practices are integral to the redesign and retrofitting of existing buildings. At their core, these practices aim to minimize waste and maximize resource use by shifting from a “cradle to grave” model to one focused on reducing, reusing and recycling. While circular economy principles were initially applied to consumer goods like clothing and food, they are now increasingly relevant to the built environment.

Manufacturing Momentum According to the third installment of a Newmark Industrial Research series released in August, more than 400 major manufacturing projects have been announced since 2020 across North America. Over the next decade, these projects are estimated to total: $530 billion in investment 270,000 new jobs A minimum of 270 million square feet of new manufacturing space To learn more, read Newmark’s report, “Manufacturing Momentum: From Construction to Production.”

The ability to create flexible and adaptive spaces is crucial for manufacturing operations, which often need to scale up or down quickly in response to market conditions. By designing properties that can be easily modified, developers ensure that these spaces remain valuable and relevant over time.

Adaptive reuse exemplifies this approach. As Lisa Domenica Iulo, professor of architecture and director of the Hamer Center for Community Design at Penn State, explained, “Within the circular economy, the adaptive reuse of existing building stock and the recycling and repurposing of materials and building components are key principles that move away from the linear economy ‘take, make and dispose’ paradigm. This reduces the embodied carbon of building materials and decreases the extraction of raw materials and their processing to create new materials, resulting in significantly fewer greenhouse gas emissions.”

Sustainable Building Practices

As companies aim to reduce their environmental footprint and comply with increasing regulations, demand is growing for energy-efficient and resource-efficient buildings. Innovative building practices, such as using renewable materials, energy-efficient systems and green technologies, are becoming more standard in nearshore and onshore developments.

A notable example of successful use of these practices is the Green Mountain Technology Center in Hardwick, Vermont, which provides training and education to high school-age students and serves as a hub for technology companies looking to nearshore operations while emphasizing sustainability. The facility is designed to meet LEED certification standards and incorporates renewable materials and energy-efficient systems.

These practices not only minimize environmental impact but also enhance the sustainability of the real estate market. According to Rahman Azari, associate professor of architecture and director of the RE2 (Resource and Energy Efficiency) Lab at Penn State, interdisciplinary collaboration across various sectors is urgently needed to better understand and address the drivers of building carbon emissions.

Embodied carbon — emissions from construction materials and processes — can account for up to 50% of global greenhouse gas emissions. Managing these emissions more closely, particularly through onshoring and reshoring of building material manufacturing, presents a significant opportunity to reduce carbon footprints. Iulo explained that initiatives like Architecture 2030 provide guidelines for achieving carbon neutrality in new buildings and renovations by 2030, in part by focusing on material reuse and local sourcing.

Penn State is actively contributing to advancements in sustainable building practices through various faculty-led research projects. For example, Benay Gürsoy’s work at the ForMat Lab explores the potential of growing buildings from mycelium. This work could lead to bio-based building materials that are grown on-site, minimizing the need for importing conventional building materials. This aligns with onshoring by using regionally available resources to construct sustainable buildings. Jose Duarte’s team at the Additive Construction (AdCon) Lab focuses on printing homes from locally sourced materials in remote locations. This work could contribute to infrastructure projects by tapping into available resources to reduce costs and environmental impact.

These interdisciplinary efforts reflect Penn State’s dedication to developing innovative solutions for sustainability challenges in diverse environments. They underscore the potential for nearshoring and onshoring by enabling local production, which can bolster economic resilience and sustainability.

Technological Integration

Integrating technology into the built environment is another key innovation driving the success of nearshoring and onshoring strategies. Penn State’s partnerships, like those facilitated by the Smeal College of Business and the College of Engineering (both of which collaborate with the Cocoziello Institute), focus on integrating renewable energy and smart systems into industrial designs. This helps companies like Alcoa in Lancaster, Pennsylvania, use data analytics and automation to reduce costs and enhance sustainability in its manufacturing processes.

Additionally, Penn State is a key player in supporting nearshoring and onshoring initiatives through its Innovation Hub spaces across Pennsylvania. These spaces offer businesses access to advanced manufacturing technologies, 3D printing, and prototyping resources, enabling companies to keep production local while leveraging cutting-edge tools.

Impact on Infrastructure

As companies move their operations closer to home, there is a growing need for infrastructure and amenities that can support these localized operations.

“At the local level, urban freight systems are impacted by the increase in online orders that need to be delivered to final customers,” Amaya said. “Relocating the suppliers or partners could have multiple impacts. On the one hand, it would reduce the delivery time from the point where the order is placed until it is delivered. On the other hand, it could lead to increased costs for deliveries to other regions, particularly those where companies have ceased operations or scaled back.” Changes in supplier locations may also result in a mismatch between the new distribution center and the target customer base, contributing to logistical inefficiencies for some delivery zones.

Infrastructure improvements are another critical aspect of supporting nearshoring and onshoring in the built environment. This includes the development of transportation networks such as roads, railways and ports that can facilitate the efficient movement of goods within local markets.

In addition to transportation infrastructure, a need also exists for digital infrastructure such as high-speed internet and data centers to support the technological needs of nearshore and onshore operations. These infrastructure investments are essential for ensuring that cities can accommodate increased demand for localized production and distribution.

Urban Regeneration

Nearshoring and onshoring also present opportunities for urban regeneration, where older, underutilized areas of cities can be revitalized to support new economic activities. This often involves repurposing existing buildings, such as converting old factories into modern manufacturing facilities or transforming vacant warehouses into distribution centers.

For example, a decommissioned shipyard in New York, the Brooklyn Navy Yard, has been transformed into a thriving industrial park housing modern manufacturing, tech startup and green energy companies. Repurposing its historic structures into modern production and innovation hubs supports nearshoring by offering businesses a central location close to key U.S. markets.

NAIOP President and CEO Marc Selvitelli, CAE, recently interviewed Peter Cocoziello and Scarlett Miller of the Cocoziello Institute of Real Estate Innovation on NAIOP’s Inside CRE podcast. To listen or subscribe, visit naiop.org/education-and-career/podcast.

Mixed-use developments are particularly well suited to the needs of nearshore and onshore operations, as they provide convenient access to local supply chains, reduce transportation costs and support a more sustainable way of living.  

Evolution and Innovation

As companies move their operations closer to home, the built environment must evolve to accommodate new types of facilities and infrastructure that can support localized production and distribution.

By embracing these changes and investing in collaborative solutions, real estate developers, urban planners and architects can create a more resilient, sustainable and vibrant built environment that meets the needs of businesses and communities alike. In continuing to navigate the complexities of the global economy, innovation in real estate development will be essential for ensuring the long-term success of nearshoring and onshoring strategies. The Penn State Cocoziello Institute of Real Estate Innovation aims to bring together experts and industry to develop sustainable, thoughtful and interdisciplinary approaches to address problems from multiple perspectives.  

Scarlett Miller is Paul Morrow Professor of Engineering Design and Manufacturing and director of the Cocoziello Institute of Real Estate Innovation at Penn State.

About the Cocoziello Institute of Real Estate Innovation The Penn State Cocoziello Institute of Real Estate Innovation is dedicated to advancing the real estate industry through cross-disciplinary collaboration and education. The institute strives to identify and develop new solutions that improve the built environment, enhance the well-being of its occupants and support sustainable development. The endowed institute is named for longtime Penn State supporters Peter and Sharon Cocoziello. Peter, founder and chief executive officer of Advance Realty Investors, serves as the founding chairman of the institute and is a 1973 alumnus of Penn State. He is also a NAIOP Research Foundation Governor and has served on the NAIOP Board of Directors and Executive Committee. Research and Expertise The Cocoziello Institute’s five key focus areas are: Next-generation building materials Insurance analysis Design for a nuclear future Environmental, social and governance Onshoring/offshoring/preshoring The Cocoziello Institute connects industry experts with Penn State’s interdisciplinary research institutes and academic colleges that intersect with real estate. Commitment to Sustainability Sustainability is a core principle of the Cocoziello Institute’s work. It is committed to promoting green building practices, reducing the environmental impact of real estate development, and advancing the use of renewable materials and energy-efficient technologies. The institute’s goal is to create a more sustainable built environment that supports the needs of businesses and communities alike. Get Involved Researchers, developers and business leaders are invited to join the Cocoziello Institute in its mission of innovating the real estate industry and transforming the built environment. Visit the institute’s website at cocoziello.psu.edu to learn more.

Adaptive Reuse, Brownfields and Housing Peter Cocoziello, founder and CEO of Advance Realty Investors, founding chairman of the Cocoziello Institute of Real Estate Innovation, and a Penn State alum, is leading a notable adaptive reuse project. His company recently undertook the renovation of a commercial building in Harrison, New Jersey, and transformed it into a five-story, 399-unit building housing studio, one- and two-bedroom residences. The location of The Wyldes in Harrison next to a PATH train station provides convenient access to New York City. The connection between adaptive reuse projects like this one and the trends of nearshoring and onshoring involves the strategic use of existing infrastructure to support new economic models. As companies seek to bring production closer to home, urban areas with repurposed spaces can provide essential housing for a workforce that supports these operations. The Wyldes is part of a larger development in which Advance Realty spent approximately $35 million cleaning up an old industrial brownfield site to build 3,000 apartments. The company has already delivered 1,000 apartments and is in the process of starting another 500-unit building.

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