After years of disruptive and often unpredictable global events, companies now consider reshoring one of the top solutions for building better resiliency. The most recent Reshoring Index from Kearney reported that 96% of CEO respondents said they were evaluating reshoring, had decided to reshore, or had already done it. Thanks in large part to those reshoring efforts, companies seeking factory space have become a notable driver of overall industrial real estate demand.
There are some hurdles to overcome for businesses reshoring production back to the United States. In this article, we’ll identify some of those challenges and how reshoring businesses can overcome them.
Challenge #1: Labor Shortages
Worker shortages have been causing problems for industrial verticals for years. A 2021 research report from Deloitte and The Manufacturing Institute claims the United States may have 2.1 million manufacturing jobs unfilled by 2030. Fortunately, recent data from the U.S. Census Bureau also shows that more workers are changing industries to pursue career opportunities in manufacturing. For now, however, staffing a new factory can pose potential problems for reshoring businesses.
Manufacturers are tackling labor issues on multiple fronts, such as:
- Using robotics, automation, and artificial intelligence (AI) to reduce the number of manual laborers needed on the factory floor through process efficiencies.
- Working closely with trade schools and universities to build programs that expand the future talent pipeline.
- Instituting diversity, equity, and inclusion (DEI) programs that help expand the pool of available talent by putting job opportunities in front of a more diverse range of candidates.
- Creating more flexible work schedules to compete with other industries.
Challenge #2: Infrastructure
The last Infrastructure Report Card from the American Society of Civil Engineers (ASCE) gave the United States a grade of C-, which is slightly up from the ASCE’s last grade thanks to improvements in ports, inland waterways, and utilities, among others. The report also highlights a 2020 statistic from the National Association of Counties, which estimates that 65% of counties in the U.S. have average internet connection speeds lower than 25 Mbps.
These statistics may feel disheartening for reshoring businesses—especially those intending to rely on automation to improve efficiency and offset labor challenges—but hope is on the horizon. The landmark $1.2 trillion Infrastructure Investment and Jobs Act passed in late 2021 aims to address many of the infrastructure issues plaguing the United States, including better access to broadband internet. Increased funding from this bill and other subsequent legislation will continue to create more viable site selection locations for high-tech factories and warehouses as years-long infrastructure projects come to fruition.
Challenge #3: Available Space
Infrastructure problems contribute to a larger issue facing reshoring businesses—lack of space. During the pandemic, an e-commerce boom created a rush on warehouses for use as fulfillment centers. Given the overlap in requirements for high-tech factories and fulfillment centers, 3PLs and retailers have occupied much of the space reshoring manufacturers would find suitable.
Furthermore, the United States spent decades outsourcing manufacturing to China and other far-flung destinations before reshoring gained traction. That means that a lot of appropriately zoned real estate contains outdated or blighted structures.
When undergoing site selection for factories, businesses need to ensure the location has the following:
- Access to enough energy resources for heavy manufacturing and automation.
- High-speed broadband internet that supports real-time data transfers and cloud technologies.
- Suitable state and local incentives to offset reshoring costs.
- A viable labor pool to hire from and build upon.
Navigating the complexities of site selection for reshoring can place significant strain on the resources of any business. However, working with a commercial real estate broker specializing in industrial real estate can help alleviate much of that stress.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost efficient solutions, and a reputation for success.