Once upon a time, the United States was a manufacturing mecca with high levels of sector employment. Then came the outsourcing and offshoring trends of the late 20^th century, which saw manufacturing jobs in places that weren’t in North America.

That pendulum is starting to return to bringing more manufacturing to North America. A Newmark report, “Manufacturing Momentum: Advanced Manufacturing Ascendancy in North America,” explains why the U.S., Canada and Mexico seem to be growing in appeal to manufacturers. This first report in a three-part series also highlights where that growth is taking place, related construction spending – and what’s meant by “advanced manufacturing.”

Defining “Advanced Manufacturing”

The report acknowledged “a panorama of definitions and perspectives” on what constitutes advanced manufacturing. The most common definition involves the use of technologies that improve manufacturing processes. However, the report explained, “certain advanced manufacturing sectors emerge as particularly innovative, future-oriented and, crucially, incentivized” with help from legislation and subsidies.

As such, high tech/digitization, automotive/transportation, energy and biomanufacturing are leading to “the greatest volumes of investment and development,” the report said. These segments had more than 90% of significant investments pledged since 2020.

Why the Increase?

The report pointed out several trends driving the momentum:

Supply chain disruptions. Issues ranging from geopolitical tensions to natural disasters continue to demonstrate the cracks in the global supply chain. As a result, “many firms are acting to bring production closer to consumption through reshoring, nearshoring, foreign direct investment and domestic expansion,” according to the report.

Federal legislative assistance. The Infrastructure Investment and Jobs Act of 2021, CHIPS and Science Act of 2022 and other similar legislation is boosting the dollars and incentives for manufacturers (and their suppliers) to stay in the U.S.

Where Growth is Taking Place

Newmark analysts explained that manufacturing announcements over the past three years “reveals nearly every U.S. state has been a beneficiary of this growth.” They said Arizona and Texas lead in the investment (with a combined $120 billion total), while Texas, Georgia and North Carolina lead the country in major manufacturing announcements.

Important geographic growth factors include land availability, low-cost power, logistics infrastructure, nearby skilled labor and business-friendly policies.

By the Numbers

The report pointed out that real private manufacturing construction spending increased at an annualized rate of 64.7% as of June 2023. Previously, in April 2023, construction spending had topped $100 billion for the first time.

Translating all of this to square feet, “the manufacturing development pipeline has already hit new heights as of mid-year 2023,” even as higher construction costs and obtaining financing have hindered development in other CRE classes.