Commercial Property Executive: Manufacturing's Comeback Boosts Industrial Space Demand

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March 30, 2023 – For years, manufacturing companies have moved their production centers overseas to reduce labor and land costs and benefit shareholders. But the tide has shifted, and manufacturing is returning to North America on a large scale.

“We have seen the manufacturing sector respond to supply-chain disruptions for reasons ranging from the fallout of COVID-19 to the lack of availability of semiconductor chips,” Rene Velasquez, senior managing director of asset and property management at BKM Capital Partners, told Commercial Property Executive. “This shift has occurred rapidly, reflected by the fact that 13 new electric vehicle battery plants were announced in 2021 and are expected to be operational within the next five years,” Velasquez said. According to a report by Deloitte, transportation companies anticipate that 20 percent of freight originations from Asia will relocate to closer-proximity markets by 2025.

Pandemic lockdowns in China led to a global chip shortage and shone a bright light on U.S. dependence on Chinese chipmakers, Valesquez noted. “This dependence has created a massive trickle-down effect since semiconductor chips are used in everything from computers and smartphones to cars, microwaves and health-care devices.” Delivery time lagged and transportation costs soared; the cost of shipping a container from China to the U.S. rose some 200 percent during the pandemic.