Chalk it up as another seismic effect of the pandemic. Reshoring – just like hybrid work schedules and office hoteling – hasn’t slowed down, even as the worst of the COVID crisis has waned.
In fact, reshoring accounted for close to $200 billion of construction spending in 2023, according to the U.S. Census Bureau — an impressive number, especially when you compare it to an average of $60 billion per year over the last decade.
Manufacturers learned their lessons from the pandemic supply chain issues (we all remember the toilet paper panic, don’t we?), and they’re now investing trillions in bringing production back to this country. Add to that additional federal legislation like the CHIPS Act, Bipartisan Infrastructure Law, and Inflation Reduction Act, and we now have a large demand for industrial real estate.
Of course, other forces are also in play – major issues such as a domestic workforce shortage and surging construction costs – and as a result, manufacturers need every financial advantage they can find as they calculate their payback period on these mega investments.
If you’re looking for a way to fill a gap between your costs and rate of return, so much hinges on choosing the right location for your plant and leveraging the credits and incentives available for your project.
The role of a professional partner in site selection
Location, location, location, as the saying goes, but the tired cliché takes on so much more meaning and importance when you’re evaluating sites for manufacturing operations.
Beyond just the actual land, a site selection partner can help you evaluate critical determinants, such as site readiness, utility infrastructure and costs, a business-friendly climate, access to clean or renewable energy sources, flexible zoning approval, expedited permitting — all of which can reduce project timelines (which means lower costs) and provide more certainty as you begin. Elli Bowen, vice president at KC SmartPort, elaborated to Inbound Logistics:
“Speed-to-market is a critical factor for most companies looking to build a new plant. … The areas that provide speed, strategic assets, cost savings, and strong partnerships will rise to the top and will continue to win these transformational mega investments.”
The right site needs to address so many questions: How accessible are air, rail, river and road transportation options? Would it benefit to be approved as a Foreign Trade Zone (FTZ)? And most important, where will your workforce come from? A site selection partner can help you address all these issues and find the best possible site for your needs.
Navigating the incentive negotiation process
The other big part of the process – both before and after site selection – is the amount and availability of credits and incentives, which can make or break your ability to meet the rate of return you need.
Work with an experienced partner who can pursue a package of incentives at the local, regional, state and even federal level, in areas such as job growth, capital growth, human resources, training and more. By negotiating with government agencies, economic development groups and other various organizations, these credits and incentives can offset your construction and operational costs, which can make a project feasible or completely eliminate it from possibility.
Don’t wait to start this process, either: Two to three years before that first shovel breaks ground is a good rule of thumb. Unfortunately, too many times we’ve seen clients try to pursue these incentives themselves, wait too long before they negotiate, or take steps to advance the project that disqualify the company from receiving incentives. In these cases, the project is delayed or halted altogether because the company can no longer hit its target.
The right expertise for reshoring success
Whether you’re expanding an existing facility or building multiple plants throughout the country, selecting sites and maximizing your credits and incentives are not DIY jobs. And that’s OK! We understand the process, and we’ve helped clients in nearly every state.
We know the questions to ask, and we know how to negotiate these incentives. And because we’ve cultivated relationships with many of the region’s organizations involved in granting these credits, we’re able to speed up the process as well. They know us, they know we’re bringing value and a great addition to their city or state, they know the project will be a win-win.
At the end of the day, we want you to save money at every step of the process. The economy, the workforce, the supply chain and the country as a whole all benefit from your investment, and we’re excited to break new ground with you.
