More Than Warehouses: Industrial Is Also Growing From Advanced Manufacturing

In the face of current events stretching back a few years, there’s a new move in industrial CRE, according to a Newmark report. “Since 2020, hundreds of major new advanced manufacturing facility announcements have been made across North America, and with each comes investment, development, jobs and another step towards solidifying and expanding critical supply chains,” they wrote.

The numbers are huge, with a minimum of initial investments in advanced manufacturing totaling $100 million since 2020 and about $400 billion in pledged future investments that will supposedly bring more than 210,000 new jobs and at least 250 million square feet of new industrial development by 2030.

Advanced manufacturing means two things in this case. One is the use of the latest technologies in materials control, artificial intelligence, robotics, and other tools to speed and improve how factories run.

The other meaning is the types of products being created, including semiconductors, solar panels, electric vehicles, and pharmaceuticals — all using the first sense of the term for production. But the categories these products represent: high tech/digitalization, automotive/transportation, energy, and biomanufacturing are “capturing over 90% of the major investments pledged since 2020.”

Pledges, of course, aren’t payments made, contracts signed, ground broken, or structures erected. But even if only part of these plans come to fruition, that will represent an enormous opportunity for CRE. That is particularly true as “development for many other commercial real estate sectors (including logistics) wanes due to a slowing economy and difficulty in sourcing construction loans, especially for speculative construction,” Newmark noted.

There are also the secondary effects on CRE. New facilities and jobs mean the need for housing to be built within commuting distance of the factories. It could easily mean reconfiguration of current warehousing strategies, as they have to reflect where the manufacturing happens. Create enough in a dispersed way (no reason to assume that many companies wouldn’t focus on southern and western locations, with presumed lower costs of doing business and more available land for building), and much of the rationale of where to put storage might change.

Lessons learned from the pandemic, with the collapse of previously trusted international supply chains, is one reason for the shift. Another is “trade tensions” between the U.S. and China that have been ongoing for years and “rising costs of Chinese labor.” Both economics and geopolitical security concerns are working arm-in-arm and has “led to a resurgence of government-led industry policy and an effort to diversity and strengthen supply chains.”