U.S. Manufacturing’s Resurgence and Its Impact on Industrial Real Estate
While industry experts continue to debate whether a “manufacturing renaissance” is taking place in the U.S., it is clear that some U.S.-based companies are “reshoring” manufacturing operations that they had moved overseas, and that some foreign companies are opening new production facilities in the U.S. According to “The US Manufacturing Renaissance: Driving a Resurgence in Industrial Real Estate,” the cover story in the latest issue of Development magazine, “there is great potential for manufacturing as it relates to industrial real estate, supported by positive trends in the development and occupancy of both manufacturing and warehouse/distribution facilities.” But these are not the factories of old, which employed thousands of low-skilled workers. The new manufacturing plants have large floor plates and plenty of highly efficient, high-tech, automated equipment inside, but employ only a few hundred — or, in some cases, only several dozen — highly skilled employees.
Some examples of this trend, in addition to those cited in the Development article:
Cincinnati-based Standard Textile has spent $40 million renovating manufacturing facilities in Thomaston, Georgia, and Union, South Carolina, where the company will produce towels for Marriott International, according to a recent Washington Post article, “Factory Jobs Trickle Back to the U.S., Giving Hope to a Once-booming Mill Town.” Standard Textile, which had previously moved many of its manufacturing facilities overseas, currently operates five plants in the U.S. and 23 worldwide. Marriott, a longtime client, recently decided to shift its production of 7.5 million towels a year from Jordan, where they had been made since the 1990s, to the U.S. Although its costs will remain roughly the same, “the shift to U.S. manufacturing would eliminate the shipment of 300 ocean containers every year,” and all of the hotelier’s towels will boast “Made in the USA” labels, the article reports. It adds that Standard Textile is investing heavily in technology and plans to install its first robotic equipment this summer.
On the smaller-scale manufacturing side of the equation, the 30,000-square-foot Shinola factory, which opened in 2011, is housed in the Argonaut, an 11-story building in Detroit that was once home to General Motors’ design studio. The factory includes a watch assembly area, a leather shop and a corporate area. Because it is the first watch assembly facility in the U.S. in decades, Shinola trained out-of-work auto assembly line workers for the more delicate task of putting together watch movements, according to “The Shinola Polish.” Demand for the company’s watches is so strong that the company recently added a second assembly line.
Heading south, and to a much larger product, European aircraft manufacturer Airbus opened its first North American production facility in Mobile, Alabama, in September 2015. The $600 million plant, located at the Mobile Aeroplex at Brookley, joins others in Europe and Asia; it is expected to produce between 40 to 50 single-aisle aircraft a year by 2018.
In Florida, Miami-Dade County’s new Metrorail trains will be assembled in the county, in a 140,400-square-foot plant located in Medley. According to a Global Trade article, Hitachi Rail USA, the American subsidiary of Hitachi Rail Italy, built the facility — its first in the U.S. — in about six months; assembly began in March and the first vehicles are expected to be put into service in late 2017, after extensive testing. The plant will manufacture 136 cars by the end of 2019.
In addition, two major Korean auto tire makers, Kumho Tire and Hankook Tire, are opening U.S. production facilities this year, according to another Global Trade article. Construction of Kumho’s fully automated seven building, more than 1 million-square-foot facility outside Macon, Georgia, began in January 2015 and should open this month. Kumho’s primary competitor, Hankook Tire, expects to begin construction later this year on a new plant in Clarksville, Tennessee, which will be its fourth outside Korea. (It already operates plants in China, Indonesia and Hungary.) Both companies expect the U.S. facilities to reduce transportation costs and the time it takes to get tires to U.S. customers; they also expect to increase their U.S. market share.
What does all this mean for commercial real estate? As the Development article authors Jason Tolliver, Andy Mace, Bethany Bailey and John Morris, all of Cushman & Wakefield, conclude, “When considering the location and nature of future investments, ground-up developers may be wise to focus attention on sites and locations that will attract manufacturing uses as well as those that will attract distribution operations. The most attractive properties will offer more robust and competitively priced utility services, zoning to allow for a variety of industrial uses and lower nominal property tax rates.”
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