004. Manufacturing Construction in US Surges
Episode Transcript:
According to the latest data from the Census Bureau, construction spending for new factories in the U.S. has experienced a staggering surge - more than doubling over the past year. In April, construction spending for factories reached an impressive 190 billion dollars, a significant increase from the 90 billion dollars recorded in June 2022. This surge in construction spending highlights the remarkable growth and investment happening in this sector.
The manufacturing industry is not only witnessing a boom in construction spending but also in job creation. Over the past two years, approximately 200,000 manufacturing jobs have been added in the U.S., bringing the total number of workers employed in the industry to 13 million, as reported by Business Insider, citing figures from the Bureau of Labor Statistics' jobs report.
One of the driving factors behind this surge in manufacturing construction is the infusion of billions of dollars in federal government spending aimed at accelerating domestic production of electric vehicles and solar panels. Initiatives like the Inflation Reduction Act and the Chips and Science Act, which both passed last summer, have provided a significant boost to manufacturing construction. These bills aim to incentivize domestic manufacturing and enhance the competitiveness of the U.S. in the global manufacturing landscape, particularly in comparison to China, which currently accounts for 30 percent of global manufacturing value.
It's worth noting that while manufacturing construction experiences a remarkable surge, other asset classes in the U.S., such as office, education, and healthcare, have witnessed a decline in construction spending. This further emphasizes the focus and momentum in the manufacturing sector, making it a key driver of construction activity in the country.
The data from the Census Bureau reveals that new factories are sprouting up across all U.S. regions with the South and Midwest having experienced the most significant increase in construction spending this year. The Rust Belt, known for its rich industrial history, has emerged as a hub for new battery and electric vehicle factories. On the other hand, the South and Southeast regions have seen a higher share of new renewable energy and solar panel factories. This geographic distribution highlights the diverse nature of manufacturing growth across the nation.
However, it's not all smooth sailing for manufacturing construction. Some factories face challenges and roadblocks, particularly under the National Environmental Policy Act (NEPA), which requires environmental reviews before they can commence operations. The NEPA review process has often been blamed for causing delays in industrial operations, adding complexity to the development of manufacturing facilities.
So, what does this mean for industrial real estate investors. The surge in manufacturing construction presents a significant opportunity for those involved in industrial real estate. The increase in construction spending, coupled with job growth in the manufacturing sector, indicates even stronger demand for industrial properties. Investors and developers should keep a keen eye on emerging manufacturing hubs, such as the Rust Belt, the South, and the Southeast, as these regions offer promising prospects for industrial real estate investments.
Furthermore, the government's focus on boosting domestic manufacturing and promoting sustainable energy production aligns with the growing trend of ESG (Environmental, Social, and Governance) investing. Investors who prioritize sustainability and align their portfolios with these initiatives may find themselves well-positioned to capitalize on the evolving landscape of manufacturing and industrial real estate.
This is Tyler Cauble, signing off.
