Corporate Real Estate 2020: Manufacturing Returns to U.S.
10 Aug, 2012
The “on-shoring” of jobs to the U.S. and other western developed countries will continue strongly through the year 2020, according to CoreNet Global, an association of corporate real estate executives which earlier this year released Corporate Real Estate 2020, a forward-looking study of corporate workplace and real estate trends.
In a survey conducted in conjunction with the Corporate Real Estate 2020 (CRE 2020) research, 51 percent of corporate real estate asset managers either agreed or strongly agreed that there would be a rebound in domestic manufacturing from offshore locations. This recovery will be driven both by companies bringing manufacturing plants and jobs back to the U.S. or choosing not to off-shore in the first place, according to the report.
“On-shoring in the U.S. will continue to gain steam due to changing global cost and supply chain dynamics,” said Dennis Donovan, principal with WDG Consulting, a national expert on site location decision-making and participant in the CRE 2020 research. “The U.S. and its manufacturing base is more competitive than at any time in a generation.”
The CRE 2020 report authors also note that the trend is already occurring. U.S. manufacturing jobs have rebounded from a 10-year low of 11,458,000 in January 2010 to a projected 11,962,000 ending June 2012, according to the U.S. Bureau of Labor Statistics (BLS). The 4.4% increase marks a gain of more than a half million new jobs.
“The labor cost arbitrage will likely diminish as a primary strategic driver as urbanization and industrialization trends in developing nations run their course,” Chris Horblit, president of Fidelity Real Estate Company, and a member of the CRE 2020 research team, said in the research report. “This, combined with ongoing security and quality concerns, as well as rising costs to transport goods and people, may well spark a marked turn to (on-shoring) by 2020.”
Examples of manufacturing returning to the U.S. abound, according the CRE 2020 report:
• The Coleman Company is moving production of its 16-quart wheeled plastic cooler from China to Wichita, KS
• Sleek Audio has moved production of its high-end headphones from Chinese suppliers to its plant in Manatee County, FL
• Peerless Industries will consolidate all manufacturing of audio-visual mounting systems in Illinois, moving that work from China
• (Many more examples are cited in the CRE 2020 report; to receive a copy, contact firstname.lastname@example.org)
One factor that has enabled this re-shoring phenomenon is companies that are relying more on technology and automated production processes to reduce labor content and boost productivity.
Another key driver is the fact that both transportation and labor costs associated with offshoring are rising and chipping away at the cost advantage associated with offshoring facilities.
The rise in Chinese labor costs could be a further boon for U.S.-based manufacturing. Labor costs have been rising dramatically in China — a major competitor for U.S. manufacturing operations. For example, Southern China is at the point where it is at 20 percent of U.S. labor costs.
An additional factor is that manufacturing at home avoids a growing problem for major corporations operating in China and other developing market — the lack of protection of intellectual property. Top executives from companies including GE, Microsoft, Kawasaki Heavy Industries, BASF and Siemens are among those firms that have criticized China for not safeguarding foreign companies’ proprietary information, a failure that has cost these companies billions of dollars.
About CoreNet Global
CoreNet Global is the world’s leading association for corporate real estate (CRE) and workplace professionals, service providers and economic developers. Our 7,000 members, who include 70 percent of the top 100 U.S. companies and nearly half of the Global 2000, meet locally, globally and virtually to develop networks, share knowledge, learn and thrive professionally.
For more information, visit www.corenetglobal.org.