US Manufacturers Bring Jobs Closer to Home

Manufacturers are facing an onslaught of difficult challenges today, from an industrial real estate shortage to supply chain disruptions and labor challenges—but many are finding that nearshoring has become the golden solution. Barbi Reuter, CEO and principal at Cushman & Wakefield affiliate PICOR and currently serving as 2022 CREW Network global board president, says that bringing jobs back to North America, typically in Mexico, increases predictability and reliability of the supply chain while retaining favorable labor access and costs compared to the US.

“Originally, offshoring was an answer to cost issues, labor and shortages. The trend to move manufacturing closer to home has grown from a desire to promote US jobs and narrow the wage gap and form free trade agreements,” says Reuter. CREW Network launched an industrial council this year to create a space for women from every sector of the industrial market to build business relationships and deals.

The nearshoring trend has only accelerated during the pandemic. According to data from the Thomas Report State of North American Manufacturing 2021 Annual Report, 83% of manufacturers are likely or extremely likely to reshore jobs, up from only 54% in March 2020, before the pandemic was a factor. “The nearshoring trend increased during COVID due to supply chain challenges, unpredictable factory closures and the well-publicized back-ups at the ports,” adds Reuter. “There is desire from employers and manufacturers to manage the downside and improve their supply chains and operations.”

Nearshoring also solves challenges related to reshoring without foregoing the benefits, like protecting intellectual property and securing better turnaround times and better controlled processes. “This particular labor market, wage increases domestically and the inflationary environment could make labor availability and costs more favorable by nearshoring,” says Reuter. “Mexico’s labor pool of skilled and technical workers has grown. After being out of the lead for three years, Mexico has returned to being the number one trade partner with the US.”

Most notably, nearshoring is the solution to perhaps the biggest challenge that manufacturers looking to expand or relocate are facing today: a shortage of space. The national industrial vacancy rate is a record low 3.3%, and the new construction pipeline also hit a new milestone at 660.8 million square feet. “We are in a stressed market that is underserved and has limited availability of space, and there is also a case of functional obsolescence in a significant portion of the available space,” says Reuter. “Industrial supply issues make nearshoring and locating a factory in Mexico more attractive.” Reshoring has been particularly popular for what Reuter calls “booming sectors” like aerospace, semi-conductors, automotive and autonomous vehicles.

Nearshoring and manufacturing activity is an important aspect of the dynamic industrial story that is often overshadowed by ecommerce and logistics-related activity. But, the growth doesn’t come from ecommerce alone. The industrial market is growing from every angle. Reuter’s team has doubled its production in the last two years, one sign of the insatiable demand, and it’s a trend that hasn’t slowed down. “It is going to remain strong for the foreseeable future.”