Real estate trends indicated a return of manufacturing to America

August 1, 2012

While industry analysts and market experts often put forth predictions regarding the economic activity within sectors, one may be able to get a more accurate reading from people who lease the buildings that will house this potential growth.

This is especially true for manufacturing, as the expansion of operations often requires more physical floor space. A new survey from CoreNet Global found that real estate executives believe the sector is set to grow by a significant amount in the coming years.

According to the survey and previous research titled Corporate Real Estate 2020, the on-shoring of jobs to the U.S. will continue strongly through the year 2020, as corporate real estate executives were asked to give their forward-looking projections for the sector during this period.

The survey found that 51 percent of corporate real estate execs think that there will be a significant rebound in domestic manufacturing. Respondents noted that companies will either bring work back from overseas or will not ship it off to these areas in the first place.

"On-shoring in the U.S. will continue to gain steam due to changing global cost and supply chain dynamics," said Dennis Donovan, principal with WDG Consulting, a national expert on site location decision-making and participant in the CRE 2020 research. "The U.S. and its manufacturing base is more competitive than at anytime in a generation."

While the survey mainly dealt with future projections, many executives noted that a change in business strategy has already led many companies to bring work back. The report authors noted that a 4.4 percent increase in employment in the sector over the past two years is evidence of on-shoring.

"The labor cost arbitrage will likely diminish as a primary strategic driver as urbanization and industrialization trends in developing nations run their course," said Chris Horblit, president of Fidelity Real Estate Company. "This, combined with ongoing security and quality concerns, as well as rising costs to transport goods and people, may well spark a marked turn to (on-shoring) by 2020."

Despite the positive sentiment surrounding the sector thanks to the survey, the overall sector contracted during July.

Bloomberg News reported that this marks the second-straight month where it dropped, as the Institute for Supply Management data came in below expectations.