Onshoring, Nearshoring Shift Industrial Landscape

Speculative industrial development will moderate next year, while total occupied industrial space will continue to grow. At the same time, onshoring and nearshoring activity is changing the way freight moves into and through the country and which markets function as industrial hubs.

With a 25% increase in domestic freight volume and a 35% expansion of logistics inventory in the past 20 years, the United States requires infrastructure improvements to ensure the supply chain functions optimally, according to Newmark Research’s latest industrial report. The firm said there is a strong correlation between investment in transportation infrastructure and expanding industrial occupancy.

However, abnormal economic and market conditions have pushed industrial development to all-time highs during the past 5 years while the high-interest-rate environment has hampered private infrastructure funding. Infrastructure spending is expected to increase as government outlays – primarily the Bipartisan Infrastructure Law (BIL) — are set to accelerate and interest rate relief will help unlock liquidity in private spending, the report said.

Freight tonnage is projected to grow by 42% through 2050 as firms onshore and nearshore production and e-commerce continues to mature. Global trade patterns over the past few decades have benefitted ocean port volume growth over intercontinental freight growth, which resulted in a domestic east-west paradigm for freight flows. This has helped maritime gateways such as Los Angeles and Northern New Jersey and intermodal markets such as Chicago, Atlanta and Dallas expand.

Maritime port markets may have more limited industrial expansion potential due to land constraints and regulatory pressures in the future, said the report.

A new north-south shift in freight flows is expected to emerge as land-based transport will surpass sea-bound goods. This is likely to benefit markets such as Houston, Atlanta, Dallas and Philadelphia in terms of expansion and infrastructure investment.

As of mid-year 2024, approximately $480 billion from the BIL (40% of total funds) has been announced. The allocation of the remaining 60% will influence future industrial occupancy growth as well as development and construction activity and the ongoing need for outdoor storage and service facilities to support projects, said Newmark.

In addition, markets that successfully integrate climate-resilient design, last-mile logistics, multimodal transport and adaptive infrastructure will become the next generation of logistics hubs, said Newmark.

“These hubs may even serve as catalysts for economic evolution, driving the development of new business models and enterprises,” the report said. “By aligning with shifting freight flows, technological advancements, and geopolitical reconfigurations, these markets will be positioned to reshape the industrial real estate landscape and establish new paradigms for meeting the anticipated demands of future consumers.”