Federal Budget For 'Made In America' Manufacturing Could Mean Even More Industrial Demand
The White House is trying to pour accelerant on the already blazing fire known as the U.S. industrial real estate sector.
In its proposed fiscal year 2022 U.S. federal budget, the White House allocated $600B in funds to support the creation of U.S.-based manufacturing jobs. The administration intends to support the initiative by establishing stronger product sourcing requirements to compel companies to build and source their materials in the U.S.
The plan includes funding for the Made in America office, created by executive order in January, which will work with other federal agencies to ensure allocated funds are spent in the U.S. While it's unknown how much more demand this provision will create for industrial space, commercial real estate experts say any focus on reshoring manufacturing has the potential to further heighten industrial space demand.
U.S. net absorption in the industrial sector hit the second-highest level ever on record at 85.6M SF in JLL's Q1 2021 industrial outlook report. The report showed the national industrial vacancy rate back down to 5.2% at the end of Q1, after 121.5M SF was leased during the quarter.
CBRE Vice Chairman and Managing Director of Capital Markets Jack Fraker declined to comment on the contents or the validity of the federal budget itself, but he said any commitment to onshoring is an extra bonus for the industrial sector.
"Federal spending to spur manufacturing job growth will be an additional boost to the industrial real estate market," Fraker said. "Made in America, new manufacturing jobs, domestic sourcing of raw materials and all the supply chain ramifications will likely mean more buildings, both factories and distribution. Most speculative industrial properties can easily be adapted to both manufacturing and certainly distribution."
Port Houston and the inland port in Dallas-Fort Worth are among the trade strongholds already experiencing a pandemic business boom as more international firms leverage U.S.-based shipping channels, storage sites and manufacturing facilities to keep products closer to home.
“The proximity our portfolio here in Houston has to the Gulf Coast ports benefits us hugely during this accelerated trend of manufacturing activity, specifically with oil and gas, oil products and petrochemicals," Hartman Income REIT Management CEO Al Hartman told Bisnow in a statement.
"We’re seeing tremendous demand for flex and industrial space in this post-pandemic market. One of the big drivers of that demand is the Texas-Mexico border ports which process over half of the state's exports.”
Even without the proposed budget, demand for U.S. industrial space is expected to remain consistently strong heading into 2022.
"Regardless of Federal programs, Texas is poised to continue its manufacturing expansion via a pro-business environment, incoming workforce migration and attractive economics," Hartman Chief Investment Officer David Wheeler said in a statement.