Logistics Development Uncertain as IRA, CHIPS Projects Stall
Of the investments announced during the first year, 40% have been delayed or paused.
Nearly half of the manufacturing projects envisioned under the Inflation Reduction Act and CHIPS and Science Act have stalled, creating some uncertainty around the demand for logistics space.
According to a Financial Times investigation, 40% of the largest U.S. manufacturing investments announced during the first year of President Biden’s industrial and climate policies have been delayed or paused. The White House offered more than $400 billion in tax credits, loans and grants designed to spur investment in technology.
A total of $84 billion of those projects have been delayed for at least two months and some have been paused indefinitely, the investigation found. Deteriorating market conditions, slowing demand and lack of policy certainty were cited as reasons for the delays.
Developers in the logistics sector have been carefully watching the progress of these investments because of the unique opportunity they present in commercial real estate. Texas, for example, has been developing new semiconductor plants thanks to the large pot of investment dollars available for such purposes. Texas Instruments is building a $30 billion plant in Sherman, TX, bringing 3,000 jobs. And Samsung is nearing completion of a $25 billion fab in Taylor, TX, creating an additional 2,000 jobs.
The bipartisan CHIPS and Science Act introduced by the Biden administration and signed into law in August 2022 was meant to revitalize the semiconductor industry in America. The Act set aside $52.7 billion – including $39 billion in manufacturing incentives for American semiconductor research, development, manufacturing and workforce development. An analysis by Colliers called the act not merely a legislative initiative but a “seismic force reshaping the contours of the manufacturing industry.”
The IRA, signed into law by President Biden in August 2022, allocated $369 billion toward a myriad of strategies for reducing carbon emissions, with a particular focus on aiding poorer communities.
Across the nation, large projects on hold include Enel’s $1 billion solar panel factory in Oklahoma, LG Energy Solution’s $2.3 billion battery storage facility in Arizona and a $1.3 billion lithium-ion refinery in South Carolina, according to Financial Times.
The tax credits and grants stretch into 2032, but inflation, labor shortages and supply chain challenges are all contributing to delays in achieving project milestones, which are key to unlocking funding.