• Ind. Space Demand Increases Need New Explanations

    by  • January 19, 2012 • CRE, Economics

    CoStar puts out a CRE centric article about increases in industrial space demand, due to manufacturing increases and ‘home-sourcing’ – or buying ‘Made-in-America.’ I don’t doubt the measurable observation in demand for industrial space – most specifically warehousing and manufacturing. Both of those are clear and with both imports increasing and demand sluggishly picking up, the demand of industrial space is a no-brainer.

    My only point of contention is the idea that this is in someway a change from the past – opposed to better domestic economic outlooks and increases in demand for goods. In specific CoStar says

    “Globalization is gradually coming full circle as companies explore insourcing or homeshoring – bringing their manufacturing workforces back to America. Cost advantages of outsourcing production are becoming less significant, and despite (or perhaps because of) the difficult economic climate, the U.S. is in a better position to compete for such jobs.”

     

    While a small amount of this is true as states and localities have practiced ‘smokestack chasing’, the reality of what is manufactured, produced and consumed at home is lost in the narrative of ‘off-shoring’ and ‘American manufacturing decline.’ The world has changed for sure – but America’s competitive advantages have not shifted all that much.

    The San Fran fed did a study on just this and found that a full 82% of dollars spend on goods consumed in the USA are made in the USA from parts made in the USA. In contrast with conventional wisdom, only  6% for goods were entirely foreign. What the Fed says in conclusion is most to the point:

     

     “Since the share of PCE attributable to imports from China is less than 2% and some of this can be traced to production in other countries, it is unlikely that recent increases in labor costs and inflation in China will generate broad-based inflationary pressures in the United States. ”

    Made in USA vs Foreign - SF Fed

     

    Meaning much of jobs overseas do not move back and forth between the USA and foreign countries (China here) as a result of labor costs.
    I think the narrative needs a change – we’re increasing demand for industrial space, because consumers and businesses are beginning to spend again, increasing demand. Macro 101 – lets not over think it.

    About

    Patrick Sprouse has over a decade of experience in the commercial real estate sector. Mr. Sprouse has held numerous positions in commercial brokerage, real estate technology and executive operations on regional, multi-market and national scales. Currently Mr. Sprouse is providing management and technology consulting service for a private real estate services company based in Washington, DC with over $1.5 billion in 2015 revenue. Mr. Sprouse has an extensive background in business management, sales engineering, project management, software selection and business analysis as well as organizational change and brand management.

    http://www.patricksprouse.com