Global Forces and Economic Changes Will Drive Demand for U.S. Real Estate for Years to Come

Site Selection Services and Industrial Real Estate Property to Benefit the Most, Reports NAI Global

NEW YORK, NY / ACCESSWIRE / September 27, 2022 / Supply-chain disruption spurred on by the pandemic and geo-political upheaval are creating demand for commercial real estate site selection work and industrial real estate facilities like never before, says a group of NAI Global professionals who specialize in these sectors.

"We're not forecasting the end of globalization or completely unwinding the way things are made, manufactured, assembled and shipped, yet there are a number of forces in play - all happening concurrently, that are clearly establishing a reorganization of manufacturing processes and changes to supply chain management, all of which is driving demand for real estate services in the U.S., regardless of the volatile economy," said NAI Global President & CEO Jay Olshonsky, SIOR, FRICS, CCIM.

Here is a short list of recent corporate announcements and related news that supports these emerging trends.

• In early August the U.S. recently passed legislation, The CHIPS and Science Act, a $280 billion government incentive program for the semiconductor industry. Among other things, it is motivating Tesla and other electric car makers to encourage EV battery production in North America and the U.S. in particular.
• Later in the month, a U.S. delegation including Indiana Governor Eric Holcomb and the state's Secretary of Commerce Bradley Chamber visited Taiwan (after Speaker Pelosi's visit) and South Korea on an economic development mission to build closer ties with what the group called "economic and academic partnerships."
• American companies are on pace to reshore, or return to the U.S., nearly 350,000 jobs this year, according to a report in the third week of August from the Reshoring Initiative. That would be the highest number on record since the group began tracking the data in 2010. The Reshoring Initiative lobbies for bringing manufacturing jobs back to the U.S. and tracked 175,000 new manufacturing jobs in the U.S. during the first half of the year.
• This summer, dozens of companies have said they had plans to build new factories or start new manufacturing projects in the U.S. Idaho-based Micron Technology Inc. announced a $40 billion expansion of its current headquarters and investments in memory manufacturing. Ascend Elements said it would build a $1 billion lithium-ion battery materials facility in Kentucky. South Korean conglomerate SK Group said it would invest $22 billion in a new packaging facility, electric vehicle charging systems, and hydrogen production in Kentucky and Tennessee.
• Reshoring is also impacting real estate transactions that are not as big as these mega-factories. For example, New Jersey-based Greenland Technologies Holding Co. is bringing home a portion of its manufacturing business from China to make electric forklifts and excavators at a new, 54,000-square-foot plant the company is building in Maryland's East Baltimore County, according to Jim Caronna, SIOR, a principal and veteran industrial real estate broker with NAI KLNB Commercial Real Estate Services in Baltimore, MD.
• The Inflation Reduction Act, which came into force August 16, is expanding the existing $7,500 tax credit to buyers of electric vehicles that includes clauses to locally source materials during car manufacturing.
• Accordingly, big investments in electric-vehicle battery manufacturing keep rolling in, most recently from Japan. Toyota said at the beginning of September it would invest an additional $2.5 billion into a cell-production facility in Liberty, NC, on top of the $1.3 billion it committed to the plant last December. Then Honda announced it had formed a joint venture with Korean battery giant LG Energy for a cell plant, probably in Ohio.
• Panasonic Holdings Corp., a supplier to Tesla Inc., disclosed it was looking at Oklahoma as the location for a $4 billion EV battery plant. That plant would come in addition to the $4 billion facility the company is already planning to build in Kansas.
• Contemporary Amerpex Technology Co., or CATL, a Chinese battery manufacturer, was on the brink of a commitment to build a battery-making plant in Mexico and was also said to be looking for a facility in the U.S. but put their plans on hold in protest to Ms. Pelosi's visit to Taiwan. However, it is likely a matter of time before the company resumes work to establish an operation (or two) in North America.
• Robotics is playing an increasingly large role with these new tech investments. The Association for Advancing Automation has reported that North American companies ordered a record 11,595 robots in the first quarter, worth $646 million.

Meanwhile, Russia's war in Ukraine is creating an energy crisis in Europe, and companies in Germany are projecting reduced manufacturing this winter to conserve energy or even shutting down plants altogether, which ArcelorMittal SA, one of the world's largest steelmakers, said it would do in early September. The company, citing soaring energy costs, will close two of its plants in Germany.

So far, however, German industrial companies do not appear to be planning any significant changes to local and regional operations, according to Michael Riekert with NAI Apollo in Frankfurt, Germany. Riekert said German automotive and other manufacturers have already moved most production to China and other countries within the EU where labor is cheaper. Further, the government is seeking alternative energy sources including reconnecting Germany to a nuclear-powered grid, as gas and oil prices have risen 200% this year and continue to climb, he said.

Riekert is one of the team members of NAI Global's Elite Corporate Services Group, led by Fred Meyer, SIOR, with NAI Mertz in Mount Laurel, NJ.

U.S. industrial real estate demand continues to soar.

"Our group is reporting rental rate increases and ongoing, large-scale industrial development projects in dozens of U.S. states with demand that is not behaving like there is an imminent recession because of the strong E-commerce sector fueled by pent up demand and employers that are still looking for employees," says Steve Pastor with NAI James E. Hanson in Teterboro, NJ. Pastor chairs NAI Global's Industrial Council which has 30+ professionals working in all of the major U.S. logistics and distribution hubs.

"When it comes to identifying a location for a manufacturing facility or U.S. regional headquarters, there are a myriad of considerations and decisions for foreign-based corporations to consider, and well beyond the most obvious, which are economic incentives offered by states and municipalities. While those are meaningful ways of lowering operational costs on the front end of real estate occupancy, companies have to think of long-term issues, such as variations of labor and environmental laws by different states, tax issues, real estate costs, buying versus leasing real estate, and of course access to talent," says Paul. D. Fulmer, a broker and consultant with NAI Commercial Partners Inc. based in Lancaster, PA. Fulmer, a real estate strategy expert with substantial corporate relocation experience, spends half of his time in New York City consulting with consulates and foreign embassies from multiple nations.

Press Contacts:

Gary Marsh, Marsh Marketing 415.999.3793 or gary@marshmarketing.com
Lindsay Fierro, NAI Global 212.405.2474 or news@naiglobal.com
www.naiglobal.com

SOURCE: NAI Global