Manufacturing Renaissance: Fact or Fiction? Jason Tolliver, J.D. Head of Industrial Research, Americas Cushman & Wakefield

Transcription

1 Manufacturing Renaissance: Fact or Fiction? Jason Tolliver, J.D. Head of Industrial Research, Americas Cushman & Wakefield

2 Jason Tolliver Cushman & Wakefield Commercial real estate economist and attorney with over two decades of experience in regional, national, and international economic development, law and economic analysis. As head of industrial research for the Americas, advises clients on economic and legal issues affecting business and commercial real estate. Frequent contributor to radio, television and print media where he discusses factors impacting the supply-demand fundamentals and commercial real estate. Jason has written many articles and has been quoted in numerous publications, including The Wall Street Journal.

3 Give Us Your Feedback for this Session! Session evaluations are available on your chair. Please take a moment at the end of this session to provide your feedback on the content and speakers. Evaluations can be handed in to a NAIOP staff member at the back of the room. Thank you!

4 Manufacturing Renaissance: Fact or Fiction? Jason Tolliver, J.D. Head of Industrial Research, Americas Cushman & Wakefield

5 Innovation Manufacturing Renaissance From the Old World to the New: Evolution of Manufacturing is Changing Supply Chains and CRE Requirements 1 Long-term Technology & Growth Cycles 1 st Wave Iron Water power Mechanization Textiles Commerce nd Wave Steam 7 power Railroad Steel Cotton 9 3 rd Wave Electricity Chemicals Combustion 12 engine 4 th Wave Petrochemicals Electronics Aviation Space th Wave Digital networks Biotechnology Software IT th Hydraulic Fracking 3D printing Mobile tech Social media Data mining Cloud computing Bioscience Green chemistry Source: Cushman & Wakefield Research

6 Manufacturing s Role: Economy 35% 30% 25% 20% 15% 10% 5% 0% Share of Total Employment Share of GDP Nominal Value Add per Worker (Index 1947=100) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Source: BEA, BLS, Cushman & Wakefield Research

7 Thousands % of GDP Manufacturing s Role: Economy Top 30 States Manufacturing as % of GDP Top 30 States # of Manufacturing Firms Source: BEA, Census Bureau, Cushman & Wakefield Research

8 Q4 1995Q2 1996Q4 1998Q2 1999Q4 2001Q2 2002Q4 2004Q2 2005Q4 2007Q2 2008Q4 2010Q2 2011Q4 2013Q2 2014Q4 2016Q2 Manufacturing s Role: Labor Market and Industrial Market 150,000 Total Nonfarm Jobs (Ths., SA) 17, ISM (L) Net Absorption (msf) (R) ,000 Manufacturing Jobs (Ths., SA) 16, ,000 15, ,000 14, ,000 13, ,000 12, ,000 11, Source: ISM, BLS, Cushman & Wakefield Research

9 Manufacturing s Role: Industrial Market Industrial Type Square Feet Multi-tenant Distribution Warehouse 5,383,996,116 Manufacturing 3,142,084,067 Bulk Distribution Warehouse 2,218,998,543 Owner/User Warehouse 1,615,198,834 R&D/Flex 1,345,999,029 Other 269,199,808 Total U.S. Industrial Market 13,975,476,397 Owner/User Warehouse 12% R&D/Flex 10% Bulk Distribution Warehouse 16% Other 2% Manufacturing 22% Multi-tenant Distribution Warehouse 39% Source: Cushman & Wakefield Research

10 Manufacturing s Role: CRE Impact Bigger Than Just Footprint Coal for making domestic steel Sheet steel manufactured for auto production Foreign steel imported Outsourced professional services for manufacturers and distributors UPSTREAM Electricity, water, and gas used by manufacturing and distribution facilities Transport costs for shipping coal, steel, etc. Fuel used for transporting Corporate headquarters (manufacturer) Corporate and contract R&D facilities Truck and rail to transport autos from factory or port to market Wholesale warehousing operations DOWNSTREAM Manufacturing: auto plant production of finished vehicles Imports of finished motor vehicles Export abroad Retail dealers Aftermarket auto leasing and rentals, vehicle maintenance, and repair services Source: MAPI Foundation

11 C&W Survey of 100 Global Firms: Costs, Risks and Conditions Manufacturing Labor Costs 40% Electricity Costs 40% Costs 40% Construction Costs Property Costs 10% 10% Economic Risk 30% Energy Risk 30% Risks 20% Corporate Risk Natural Disaster Risk 20% 20% Talent / Labor Force 25% Logistics / Access to Markets 25% Time to First Supply 25% Conditions 40% Sustainability / Corporate Responsibility Business Environment 15% 10% Source: Cushman & Wakefield Research

12 C&W Survey of 100 Global Firms: Some of What We Heard ON ACCESS TO SKILLED LABOR While automation continues to reshape the manufacturing industry, automated processes add to demand for skilled labor ON INCENTIVES AS A SITE DRIVER Incentives can make a difference between two viable sites, but can t make an unworkable site work. ON SUSTAINABLE MANUFACTURING Sustainability is part of the corporate agenda but remains dictated by long term cost implications. Source: Cushman & Wakefield Research

13 C&W Survey of 100 Global Firms: What We Heard About Siting Site Selection: Three Key Drivers Reduce the total cost of operations Reduce the risk of business interruptions Improve speed to market Top Location Factors Cited 1. Availability of Skilled Labor 2. Infrastructure and Connectivity 3. Energy Availability / Cost 4. Availability of Buildings / Land 5. CRE Occupancy / Construction Costs 6. Corporate Tax Rates / Incentives Source: Cushman & Wakefield Research

14 Manufacturing Renaissance: Sizing Up The Competition 140 The Top 25 Export Economies - Manufacturing Cost Index, 2016 (U.S.=100) Source: U.S. Economic Census, BLS, BEA, Euromonitor, Economist Intelligence Unit, BCG, Cushman & Wakefield Research

15 % of State GDP Growth in Manufacturing GSP ( ) Millions Manufacturing Renaissance: Seeing the Growth Manufacturing Absorption Manufacturing Completions Manufacturing Vacancy 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source: BLS, BEA, Cushman & Wakefield Research

16 Manufacturing Renaissance: Which Sectors? Snapshot by # of Firms: Reshoring + FDI Snapshot by # of Jobs: Reshoring + FDI Transportation Electrical Fabricated Metal Plastic/Rubber Electronics Apparel Chemicals Transportation Electrical Fabricated Metal Plastic/Rubber Electronics Apparel Chemicals Source: BLS, Reshoring Library, Cushman & Wakefield Research

17 Manufacturing Renaissance: Technology Reshoring + FDI by Tech Level ( ) Reshoring + FDI by Tech Level ( ) Tech Level Reshoring FDI Totals Jobs Firms Jobs Firms Jobs Firms Low High High 20% 16% 15% 16% 16% 16% Medium High Medium Low 49% 27% 46% 38% 47% 33% 15% 34% 31% 35% 27% 34% Low 16% 23% 7% 12% 9% 17% Medium Low Medium High Source: NSF, OECD, Reshoring Library, Cushman & Wakefield Research

18 Manufacturing Renaissance: Growth College Graduates (2015/25) India 10% Brazil 7% Indonesia 6% China 5% USA 2% UK 1% Japan 0.5% Germany -0.3% Source: OECD, Oxford Economics, Cushman & Wakefield Research

19 Total Companies Total Jobs Manufacturing Renaissance: Where Are They Locating? 25,000 20,000 15,000 10,000 5,000 0 Top 30 States by total # jobs ( ) Top 30 States by total # firms ( ) Source: Reshoring Initiative, Cushman & Wakefield Research

20 Manufacturing Renaissance: Where Are They Locating? Employment Concentration Firm Concentration Source: BLS, Reshoring Initiative, Cushman & Wakefield Research

21 Manufacturing Renaissance: Disappearance of Large Factories Year 99 or less Factory Workers Factory Workers Factory Workers Factory Workers 1,000-2,499 Factory workers ,956 22,499 7,968 3,322 1, ,058 21,744 7,433 3,011 1, ,900 19,227 6,349 2,486 1, ,836 18,943 6,172 2,384 1, ,148 15,428 4,764 1, ,396 15,575 4,986 1, Chg., % % % % % 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% % Change in # of Factories by Size of Workforce or less 100 to to to 999 1,000 to 2,499 Source: BLS, CRS, Cushman & Wakefield Research

22 Manufacturing Renaissance: Repurposing Old Facilities Average Age of Plants Closed by Decade Repurpose Use Categories s 1990s 2000s 2010s 50% 40% 30% 20% 10% 0%

23 Manufacturing Renaissance: Adaptability Checklist Heavy Manufacturing / Regulated Plants Light Manufacturing Plants Build structural components to accommodate heavier loads Build in raised floor and movable walls Use below-the-floor quick connect modular electrical and data cabling Use bus duct and fabric duct to accommodate product line changes Use modular design and centralized services Plan for multi-product capacity Ensure that zoning and economic development plans support future uses Factor in additional acreage for more employee parking over time Build in power redundancy for ability to increase power supply Design scalable layouts Plan sufficient building heights to allow for multi-level platforms Plan for future expansions up front during planning phase Follow guidance for heavy manufacturing plant Focus on convertibility in addition to expandability

24 Manufacturing Renaissance From the Old World to the New: Evolution of Manufacturing is Changing Supply Chains and CRE Requirements POWER GENERATION (LATE 18TH CENTURY) INDUSTRIALIZATION (BEGINNING OF TH CENTURY) ELECTRONIC AUTOMATION (1970S-2000S) SMART AUTOMATION (2010 ONWARD) Introduction of the power loom in 1784 Mechanization of production facilities with water and steam power First assembly line in slaughterhouses in 1870 Electrification drives mass production across industries First programmable logic controller (PLC) in 1969 Growing application of IT to automate processes Advancements in technology, new productivity levers, and changing workforce needs will drive manufacturing siting requirements Source: National Academy of Science and Engineering, Deloitte, Cushman & Wakefield Research

25 Manufacturing Renaissance: Fact or Fiction? Open Discussion

26 Give Us Your Feedback for this Session! Session evaluations are available on your chair. Please take a moment at the end of this session to provide your feedback on the content and speakers. Evaluations can be handed in to a NAIOP staff member at the back of the room. Thank you!