Manufacturing’s Return to the U.S. Validates 2020 Visioning

Posted on July 29, 2013

Industrial overtakes multifamily as the strongestperforming
commercial real estate sector

Can we say, “We told you so”?
In some important
respects, Corporate Real
Estate 2020’s 46 predictions
on the future of business and the changing
nature of work are living up to the
“bold statement” label that CoreNet
Global ascribed to them.
For the nearly 300 industry professionals
whose visioning helped shape more
than 500 pages of forward-facing research
analysis, there is validation about tomorrow’s
world as they foresee it.
It can readily be found in our forecast
that manufacturing jobs would be “reshored”
to the United States and Western
Europe. While the European Union’s
sovereign debt issues have slowed the trend
there (with the exception of Germany),
Manufacturing’s Return to the
U.S. Validates 2020 Visioning
Industrial overtakes multifamily as the strongestperforming
commercial real estate sector
the U.S. has realized a net gain of 432,000
new manufacturing jobs, an increase of
3.6 percent, since August 2010, during the
dregs of the Great Recession.
Manufacturing employment today
totals 12 million in the U.S., compared
to just over 11.5 million three years ago.
It’s a long climb back from the new
millennium high-water mark of 15 million
jobs, ofering another example of
today’s ‘new economy of scale.’
But, to that end, we got it right, saying
in August 2011, when our 2020 iteration
began, “Tere will be a re-emergence of
manufacturing in the U.S. with smaller
regional facilities.”
Evolving From Rachets to iPads
At the center of this smaller-scale
rebound is advanced automated machine
technology. So, imagine fewer people
running leaner, more agile industrial
facilities, driving assembly lines with an
iPad instead of a ratchet. Tese individuals
are likely to have received technical
degrees coupled with two years of university
Te rebound is robust enough to make
industrial the strongest-performing sector
of the commercial real estate industry.
“Te resurgence of the manufacturing
industry is giving commercial real
estate’s industrial sector a strong boost
right now,” reported,
from SIOR’s spring world conference in
May of this year.
Industrial recently bypassed multifamily
housing as the hottest industry
category, after multifamily led the pack
during the recession as a result of the
backlash from the sub-prime home
mortgage disaster.
But as our 2020 analysis pointed up,
there are other outcomes infuencing
manufacturing’s return, including:
¶ China’s rising middle class, ofering
lower-cost market distribution to manufacturers
¶ Volatility of oil prices and the rising
cost of transoceanic distribution ($2,300
to ship a 40-ft. container from China to
West Coast vs. $1,200 in 2009)
¶ Te drive for energy efciency and
the unsustainability of globally dispersed
supply chains
¶ Product quality control and safety
in ‘events’ ranging from baby formula to
pet food
¶ Intellectual property piracy, trademark
and copyright infringements
¶ Rising operating costs in formerly
emerging markets like China and India
Another noteworthy, game-changing
development: U.S.-produced natural
shale gas is also fueling manufacturing’s
resurgence in the U.S.
Proof of Concept
“Te ofshoring boom does appear
to have largely run its course,” Paul

Ashworth told Time Magazine in its
April 22, 2013 edition in an in-depth
trend report, “Made in the USA.”
Ashworth is the chief U.S. economist for
the research frm Capital Economics.
Time reported, “Against all odds,
manufacturing is staging a comeback.”
For example, Apple is cited. “Famous
for its factories in China that produce
its gadgets, (Apple) decided to assemble
one of its Mac computer lines in the
U.S.” Walmart, pioneer of global sourcing
in search of the lowest consumer
prices, will increase spending with
American suppliers by $50 billion over
the next 10 years. France’s Airbus,
meantime, plans on building JetBlue’s
aircraft in Alabama.
Ten, there’s the example of North
Carolina’s furniture industry, which
Time reports lost 70,000 jobs to
companies outside the U.S. Ashley
Furniture is investing at least $80
million to build a new plant in North
Carolina. Te magazine quotes Ashley’s
CEO observing, “If you go back 10
years, we didn’t think we’d be manufacturing
in the U.S.”
“From education to equipment,
today’s (industrial) worker has come a
long way,” the Time article also states,
ofering another example: 3D Printing.
It embodies the “relentless advance of
technology” that frames the Corporate
Real Estate 2020 vision implying a
massive scaling-of-innovation opportunity.
“Would-be manufacturing entrepreneurs
can buy the (3D) devices and
begin turning out high-tech metal parts
for aerospace, automotive and other
industries at lower cost and higher
quality faster than ofshore suppliers,”
Time also reported.
As Japan’s automated automobile
assembly lines and quality circles showed
in the 1980s, the labor-intensive model
is fast being left behind. Now, factory
workers are more likely to ofer a blend
of technical and artisan skills, managing
automated production lines. More than
half (53 percent) have at least some college
education, and one in 10 has a graduate
or professional degree. Compared
to the average hourly wage of $2.57 in
1960, plant workers today earn an average
of $24.11.
All of this combines to make food,
chemicals and complex machinery the
top three manufacturing industries in the
U.S. today. Louisiana, for example, has
capitalized on the chemical manufacturing
trend. Dow Chemical is expanding
ethylene and propylene production there
and is expected to create 35,000 jobs in
Texas, according to Time.
Looking across the spectrum of manu-
Other Predictions
Coming to Fruition
Beyond manufacturing, other
predictions residing within our eight
domains of Corporate Real Estate
2020 are also turning out to be accurate
precursors of the fast-evolving
global knowledge economy.
Energy Management
We predicted that buildings, sometimes
connected by ‘micro-grids,’ will be
both consumers and producers of
energy and that advances in energy
storage will impact building operations,
transportation and planning. According
to global energy management thought
leader Dr. Amory Lovins, founder of
the Rocky Mountain Institute and
author of the book Reinventing Fire:
Bold Business Solutions for the New
Energy Era, “A global clean-energy race
has emerged with astounding speed.
The ability to operate without fossil
fuels will defne winners and losers in
business – and among nations.” At the
center of that economic, environmental
and national security paradigm shift
are net-zero buildings that produce at
least as much energy as they use, such
as DPR Construction’s 16,000-sq.
ft.-(1,486 sq.m.-) offce in Arizona Or the
300,000 sq.ft- (27,870 sq.m.-) National
Research Energy Laboratory in
Colorado. This development lends
credence to CoreNet Global’s net-zero
position advocating conservation.
Big Data Management
and Analytics
We said that technological innovation
will enable integration of data streams
from different parts of the organization
into cross-functional dashboards to
better support real-time decision making.
The management and analysis of
‘big data’ is clearly becoming an overarching
theme, not only to support the
rapid decision making that frames the
knowledge economy, but its effective
use will win CRE executives ‘trusted
advisor’ status and a ‘seat at the table.’
Big data will affect everything from
the ability to accurately forecast the
demand for space to informing the
triple bottom line of people, planet
and profts. No wonder Harvard
Business Review rated the data
scientist as “the world’s sexiest job.”
Effectiveness vs. Effciency
Our 2020 forecast also calls for a shift
toward effectiveness and away from
effciency, saying that organizations will
recognize the potential detrimental impact
of cost cutting on productivity (and,
for that matter, employee engagement),
changing the conversation from cost
cutting to value creation. A study by
Jones Lang LaSalle (JLL) proves the
point. In a new report on Global Corporate
Real Estate Trends, JLL unearths
the fve top corporate real estate risks,
including possible negative impacts to
corporate competitive advantages and
proftability from cost-cutting, procurement
processes, lack of collaboration
between functions and failure to drive
productivity. CoreNet Global’s vision for
the formation of a ‘Super Nucleus’ to
serve as the corporate ‘brain center’ for
enabling work and engaging employees
also implies more emphasis on investment
over cost management.
Based on a recent study, the Gartner
Group expects a majority of corporations
will require employees to bring
their own devices to work (BYOD) by
the year 2017. We predicted companies
would become more comfortable with
the notion of ‘bring your own technology’
(BYOT), thanks to the consumerization
of technology, as defned
by Gartner and increased internal IT
security. It’s all about the blurring of
lines between work and personal life.
facturing on a global scale, regardless
of whether companies are expanding
industrial operations in America or
elsewhere, they are reinventing themselves
and becoming more competitive.
Ford, Caterpillar and General Electric
(GE) have embraced this transformation,
becoming more globally competitive
along the way and restoring their
shareholder value in the process. As Je