Business Trends

Could Cheap Natural Gas Prices and Industrial Demand be Linked? by CBRE

File Type: Free Content, Article
Release Date: August 2013
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Lakeview South XII - Pleasant Prairie, Wisc.

Buzzwords such as “insourcing” and “onshoring” are getting a lot of play today in the commercial real estate world today and the U.S. indeed has powerful competitive advantages to recommend it as a manufacturing center, such as a highly trained workforce, cutting-edge technology and lower energy prices, reported CBRE Econometric Advisors in its latest issue of About Real Estate. These drivers could have a significant impact on industrial real estate now and in the future.

Contrary to accepted wisdom, U.S. manufacturing has not been on the decline for decades. In fact, the U.S. industrial and manufacturing sectors have grown steadily throughout the history of the country. The recent, severe recession undoubtedly slowed industrial development somewhat, but it did not stop it. Industrial development hit an all-time high just prior to the recession in 2007 and is nearing that peak in 2013 once again.

“For real estate,” writes CBRE Econometric Advisors’ economist Jared Sullivan, “there are essentially two ways by which expanding or relocating factories will have an impact. Manufacturing facilities constitute nearly a quarter of the nation's industrial stock, and those facilities often have warehouses that support them by storing inputs for production and finished goods. Since a local market benefits as it expands its manufacturing base and output, the local economy will grow, ultimately boosting demand for regional warehouse and distribution facilities. Major markets in high-exposure states—such as Indianapolis, Detroit, Chicago, and Pittsburg—stand to benefit if the potential resurgence in these energy-intensive industries is realized.”