Large-Scale EV Projects to be Shot in the Arm for Industrial Sector

Large-scale investments in electric vehicle megaprojects will be transformational for smaller, secondary industrial markets, leading to steep vacancy declines and surging prices.

Demand for these projects is surging as oil prices remain elevated amid rising geopolitical tensions, with EV production increasingly onshoring to the US – and supply chain disruptions continue to drive the sector toward US production facilities

 According to Mark Russo, Director and Head of Industrial Research for North America at Savills, at least 13 new EV battery plants are expected to come online in the US over the next five years. And the economic ramifications are big: EV megaprojects are multibillion-dollar investments, Russo says, typically spanning several million square feet of industrial property and creating new jobs in the markets where they’re located.

“The drivers of change in local market dynamics are both direct and indirect via the knock-on effects of expanding suppliers and shifting investor perceptions of the location due to these high-profile projects,” Russo says, noting that announcements of EV megaprojects have been piling on as of late. Such projects are “highly concentrated” in secondary markets across the Southeast and Midwest, Russo says.

Site selection is typically governed by factors including proximity to existing automotive assembly plants, labor availability and cost, government incentives, and proximity to raw materials, according to Savills. And the firm says its case studies around plants opening over the last decade in cities like Nashville and Reno “all show similar results:  low vacancy and high rents in the markets soon followed.”

Nissan’s plant south of Nashville producing lithium-ion batteries for its LEAF model EV, for example, created 1,300 jobs when it opened in 2012. And over the next two years, vacancy in the overall Nashville industrial market declined by 350 basis points, twice that of the overall market, while rents grew by 11% (compared to 6.4% in the US overall). Sale prices for industrial properties in Nashville also spiked by 35.5% (compared to 19.6% in the overall US).

The Biden Administration’s $1 trillion infrastructure bill has earmarked $5 billion for a national high voltage charging network over the next five years, but private investors will need to step in as well, experts say. EVs are poised to play an increasingly important role in improving last-mile delivery efficiencies.