There is an unfolding opportunity for industrial real estate that seems to be getting over looked. It comes from a combination of cost differentials now appearing, technology in manufacturing, along with the opportunity for energy independence.
First the energy issue. The real damage being done by Obama to the long term prosperity of the country is his anti carbon ideology which translates into killing the Keystone pipeline and severely restricting new drilling and well development. New drilling technology has opened up vast potential for oil and gas development to the extent that the US could be close to or at energy independence in a few years if drilling were to be allowed to proceed in a free market basis. That does not mean there should be a relaxation of rules on fracking or drilling. It means setting a realistic standard for these issues and then letting the free market go to it. The wild hyperbole from Lisa Jackson and the radical environmentalists is simply just that. Unfounded scare statements that the mainstream media picks up and, as usual, does not bother to gather the facts. Reality is there has been almost no contamination from fracking, and the tiny bit has been very contained. Flames are not coming out of faucets. Drinking water has not been contaminated. North Dakota is experiencing a massive economic boom. New York, which is not allowing fracking, is straining to pay its bills. Upstate New York would also turn to a booming economy if Cuomo would allow drilling to proceed. Gas production has caused the price of natural gas to plummet. It is clean and cheap. It is now being used to power trucks. This all means that the cost of fueling manufacturing in the US, and delivering products, has just seen a major cost reduction. Oil is also being found by horizontal drilling and fracking, and this technology is moving the country to a massive new level of domestic reserves never imagined even a few years ago. If you can power trucks with natural gas, then cars can be as well. In time it is possible we will have cheap fuel and minimal pollution using existing infrastructure instead of wasting taxpayer funds on windmills, solar fiascos, and subsidies for electric cars nobody wants to buy.
The Keystone pipeline will provide the US with Canadian oil to supplement the newly discovered reserves in the US, and will, over time, allow us to have true energy independence. In a short time it is likely that Chavez will be dead, or overthrown, and then we will have no need to buy oil from the Arabs. That may be several years away, but it is happening quickly, and if Obama is replaced in November it will happen much faster. The geopolitical ramifications and security ramifications are monumental. Obama is more interested in appeasing some radical environmentalists than in solving for security and economic growth. That is the real cost of Keystone and restricting drilling.
The recession has caused companies to again look at their manufacturing costs and to invest in more technology in the manufacturing process. Labor costs are now well below those of Europe, and when you add in transport costs, technology piracy and Chinese political issues, and the declining cost of gas for power, it is becoming more economic to produce many products in the US. The issue is getting rid of the Obama administration belief in government control of pricing and production. In short, reversing the excessive regulation of business, and the attacks on wealth creation. If we can have a return to a more free market economy, instead of the government regulatory philosophy, then with the coming energy independence, the reduction in production costs through technology, and a reviving economy by 2014, industrial production in the US could see an major upsurge by 2014-15. None of that is a stretch to believe. It will mean a potential for a major new value and development opportunity in industrial buildings. For those of you in that space, your time is coming. You just need to be patient.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.