Welcome to another edition of our Industrial real estate news roundup!

A point I make regularly is that we need to split industrial real estate into sub-categories: warehousing, manufacturing, and flex.

That's because there's been a fundamental shift in the market, although we wouldn't be able to fully understand it if we just focused on industrial real estate as a whole. To illustrate, over the past few years the warehousing market surged while manufacturing lagged behind.?

In a very short period of?time, however, this trend shows signs of reversing.

Take the fact that?warehouse jobs have dropped to the lowest level in over a year. We all know how Amazon made plans to cut back on their US footprint, but this has also?extended into other parts of the world.

To be clear, the warehouse?market is still relatively healthy (for example,?Extensiv just did a surveywhere they reported "Finding additional warehouse space is a top priority for many [companies], especially those serving ecommerce customers"), it's just not experiencing the same crazy growth as it did over the past few years.

Manufacturing, on the other hand, is booming. Part of it stems from companies wanting to?safeguard against future supply chain shocks, another comes from the?burgeoning EV and battery industry,?while another major driver is the?CHIPS & Science Act?which is injecting billions and billions of dollars into high-tech manufacturing.

But,?and it's a big but, with re-shoring / onshoring trending upwards over the past few years, it's only inevitable to see unique challenges arise alongside it.

Take?this example where?Scout Motors searched and evaluated 74 different sites all across the US before "settling" on one in South Carolina. Companies of all sizes have faced similar issues where it seems like there must be a lot of options available, but once the criteria gets very specific it significantly?narrows the list. In Scout Motors case they needed a very large plot of land,?direct rail access, clean power, and a robust workforce.?

As noted in the article:

"Scout's scramble highlights a challenge facing dozens of global manufacturers. Fueled by a combination of hefty government incentives, a transition to new transportation and energy technologies, and national security concerns about relying on distant suppliers, especially in China, there's a factory-building boom taking place across the U.S.

But all that new construction has a real estate problem. More specifically, a "megasite" problem. While the U.S. has plentiful land, there are not that many places to quickly plunk a billion-dollar-plus factory."

There was a great graphic showing all the mega-sites over the past 5 years:

So a quick recap, many companies raced to add new warehousing inventory over the past few years and most would concede they overshot their mark.?Vacancy rates are slightly ticking up, albeit to levels still at historical lows. It's hard to imagine a scenario where we will see growth rates anywhere near where they were recently, but on the other hand the manufacturing industry is exceeding expectations.

Naturally, there are both challenges and opportunities in both warehousing and manufacturing, which is great because it gives me something to write about each week!

Thanks for following along, catch you next week.

This Weeks Episode

Join in live this Tuesday, April 18, 2023 at noon EDT for an interview with Todd Hirsch.

We'll be discussing the following:

? Current state of the economy

? Interest rates vs inflation

? Commercial & industrial real estate outlook

This will be a live interview so join in and ask any questions that come to mind!