As onshoring becomes an increasingly favored choice for several North American manufacturers, the resurgence of ‘Made in America’ manufacturing looms on the horizon as manufacturers grow weary of the fragility of Just-in-Time delivers, the US-China trade war and dealing with overwhelmed West Coast ports. This shift to localized production, especially for critical industries such as healthcare and medical devices, will have long lasting effects on the commercial real estate industry – especially industrial real estate. However, this uptick in manufacturing will not only thrust demand for industrial real estate but will also profoundly impact the multifamily real estate market as well. The reality is that the rise of domestic manufacturing will lead to the creation of several new manufacturing jobs which would subsequently result in an increase in demand for multifamily real estate in select markets. This short article will examine three multifamily markets that are poised to outperform as a result of the onshoring of American manufacturing.

1. THREE MULTIFAMILY MARKETS
THAT WILL BENEFIT FROM THE
ONSHORING OF AMERICAN
MANUFACTURING

2. INTRODUCTION
▪ Several concerns regarding the lack of critical resources to contain and treat
infectious diseases have not only prompted manufacturers to rethink global supply
chains but have also galvanized several manufacturers to reshore their businesses
in order to avoid future supply chain disruptions.

3. ▪ Industries such as medical devices, personal
protective equipment, sanitation gear,
disinfectants, laboratory supplies, and testing
equipment, have been identified as the most
likely candidates to repatriate their
manufacturing facilities following the COVID-19
crisis.
▪ However, several businesses beyond health care
will also follow suit, including computer
hardware, heavy industries, and smartphone
manufacturers.

4. ▪ The fragility of ‘Just-in-Time’ inventory
management, the ongoing US-China trade
tension, and rapid advancement in robotics
and automation have created conditions such
that it has now become financially and
strategically preferable for firms to begin
manufacturing closer to the end-user.

5. ▪ In addition to driving
demand for industrial
space across the nation,
this uptick in
manufacturing will likely
lead to the creation of jobs
and subsequent demand
for multifamily housing
across several markets in
the US.

6. ▪ Southeastern and Southwestern markets
characterized by business-friendly policies,
low taxes, and ‘affordable’ housing will stand
to benefit the most of this shift.
▪ This presentation will examine three
multifamily markets that will stand to benefit
the most from the repatriation of American
manufacturing.

8. ▪ Median House Price (2019):
$247,500
▪ MSA Population Increase (2010-
2019): 45%
▪ MSA Median Income: $48,062

9. ▪ Top Individual Income Tax: 0%
▪ Top Corporate Tax: 0% (levies a gross receipt tax)
▪ 4 Hour Radius Population: ~ 20,000,000
▪ Nearest Seaport: Port of Houston ~ 3 to 4 hour drive.

10. ▪ Dallas-Fort Worth has been the
darling market for multifamily
investors this past business cycle.
▪ The metro area has experienced an
astonishing level of growth over the
past two decades, gaining close to
over two million residents since
2000.

11. ▪ Dallas and its surrounding suburbs have the 3rd largest concentration of corporate HQs in the
nation.
▪ As a matter of fact, it is the only metro area to be home to three of the top ten Fortune 500 firms.

12. ▪ The metro area, which is home to the
largest information technology
industry base in the state, has also
surpassed Chicago to become the
2nd largest financial services hub in
the United States – trailing only New
York City.

13. ▪ Furthermore, several big-name corporations have
relocated to Dallas over the past five years.
▪ McKesson and Charles Schwab are two notable
examples of firms that have relocated and/or
expanded their presence in the Dallas area over the
past decade.

14. ▪ In 2016, Jacobs Engineering, one of
the world’s largest engineering
companies, relocated from Pasadena,
CA to Dallas, citing the city’s
favorable business environment and
the city’s strong labor pool.
▪ In the same year,Toyota also decided
to relocate its HQ from Southern
California to Dallas as well.

15. ▪Stanley Black & Decker announced
that it will be reshoring 500 new jobs
from China to the metro area by the
end of 2020.

16. ▪The largest engineering and
construction company in the Fortune
500, Fluor, is also headquartered in the
Dallas-Fort Worth metropolitan area.

17. ▪ The region’s strong infrastructure, access to
capital, talented labor pool, pro-business
policies, and low cost of living will continue
to drive corporate relocations in the near
future.

19. RENO-SPARKS (RNO)
▪ Median House Price (2019): $416,500
▪ MSA Population Increase (2010-2019): 37%
▪ MSA Median Income: $53,047

20. ▪ Top Individual Income Tax:
0%
▪ Top Corporate Tax: 0%
(levies a gross receipt tax.
▪ 4 Hour Radius Population: ~
10,000,000
▪ Nearest Seaport: Port of
Oakland ~ 3 to 4 hour drive

21. ▪ Billing itself as “The Biggest
Little City in the World”, Reno
has transformed from the
gambling capital of the world
into a booming logistics and
technology hub.

22. ▪ Reno is home to the Tahoe Reno Industrial Center, which is
the largest industrial center in the United States.
▪ The TRIC Center has over a hundred companies including
several warehouse and fulfillment centers for companies
such as PetSmart, Home Depot, and Walmart.

23. ▪ As e-commerce continues to grow a
double-digit clip, Reno’s strategic
location and favorable business climate
will be a major draw for companies
seeking warehouse and distribution
solutions moving forward.

24. ▪ Unlike California, which prohibits
having more than two 28 ½ feet
trailers connected to a truck, Nevada
allows up to three, which allows for
more efficient movement of freight.

25. RENO-SPARKS (RNO)
▪ The Reno metro area is within a day’s
drive of 11 Western states and can
serve up to 60 million people.
▪ The labor statistics for Reno reflect
this rapid growth as logistics staffing
grew by 46 percent between 2009
and 2015.

26. ▪ There is little to suggest that this figure
will decrease as e-commerce adoption
increases across all industries including
perishables items like groceries and
pharmaceuticals.

27. ▪ The most notable building in the TRI Center is the
behemoth 5.8 million square feet Tesla
Gigafactory, a subassembly factory where Tesla
Inc supplies lithium battery packs for its cars.
▪ Tesla Inc’s presence in Reno underlines the
metro’s emerging tech sector.

28. RENO-SPARKS (RNO)
▪ Several large firms, such as Apple and
Rackspace, have either expanded or built
data centers in the metro region.
▪ Reno is also bracing itself for the
construction of Switch’s SuperNAP
campus – which is projected to be the
largest data center upon completion.

29. RENO-SPARKS (RNO)
▪ Several trends in consumer
behavior ranging from online
shopping to the rise of virtual
healthcare will result in the
creation of immense amounts of
data that will need to be safely
stored.

30. ▪ In summary, Reno’s position as a
logistics and IT hub in arguably
one of the most business-friendly
states in the nation will draw
companies and individuals alike
seeking a cheaper alternative to
the expensive, overregulated
West Coast.

32. ORLANDO (MCO)
▪ Median House Price (2019): $236,400
▪ MSA Population Increase (2010-2019): 59%
▪ MSA Median Income: $48.559

33. ▪ Top Individual Income Tax: 0%
▪ Top Corporate Tax: 5.5%
▪ 4 Hour Population Radius: ~ 20,000,000
▪ Nearest Seaport: Port Canaveral – ~ Less
than one hour

34. ▪ Listed as a “Gamma-” city, Orlando, like many of
its Sun Belt counterparts, has experienced
immense growth since the turn of the millennium.

35. ▪ Aside from being one of premier tourist
destinations in the world, the Greater
Orlando area also hosts a well-
established defense industry and a
correspondingly strong manufacturing
sector.

36. ▪ Florida’s elimination of the manufacturing and
equipment sales tax in 2015 has propelled
growth in Central Florida as the hub for
manufacturers looking to serve the growing
markets of Latin America and the Caribbean.

37. ▪ In addition to the state’s tax-friendly
policies, the adage of ‘Location, Location,
Location’ has drawn several manufacturers
and distributors to Orlando thanks to its
proximity to several major transportation
hubs, including Orlando International
Airports, Port Canaveral, two major
interstates and access to national freight
networks.

38. ▪ The metro region also features a growing
healthcare industry with the
establishment of the University of Central
Florida’s College of Medicine and a new
children’s hospital.

39. ▪ However, it is the metro’s strong
ties to the Department of
Defense that serves as the
region’s economic anchor.
▪ Since the Second World War,
Orlando has served as a major
aerospace and naval center for
the US military.

40. ▪ The Central Florida Research
Park, the 4th largest research
park in the country, is located in
the Orlando metro region and
employs over 8,000 people.

41. ▪ As the home to the simulation
commands for the US Army, Navy, Air
Force, Marines, and Coast Guards,
Orlando hosts the
Interservice/Industry Training,
Simulation, and Education Conference
– the largest modeling and simulation
conference in the world.

42. ▪ Simulators are of particular
importance to the Department of
Defense as it cuts the risk and costs
associated with training with real
equipment, offers military personnel a
safe and controlled environment to
learn how to operate complex
vehicles or machinery, and allows
trainees to experience a wide variety
of scenarios and environments that
they may encounter on duty.

43. ▪ The importance of simulation training is
highlighted by the $1.4 billion worth of
federal contracts that are awarded
annually to the Central Florida
Research Park alone.
▪ As the US prepares to enter into a new
Cold War with China, the centrality of
defense contracting to preserve
national security interests cannot be
understated.

44. ▪ This direct investments into the local
economy, combined with the state’s
tax-friendly treatment of
manufacturing and the metro’s
centralized location as the gateway
between the US and Latin America,
will create strong demand for
multifamily real estate in Orlando
for people and businesses seeking
a sunny, affordable and tax-friendly
jurisdiction.

45. CONCLUSION
▪ The inevitability of American manufacturers to onshore and reshore some of their
operations will be one of many catalysts for the surging demand for multifamily
real estate in the coming decade.

46. ▪ Just In Case inventory strategies,
regionalized supply chains, the
rising costs of doing business in
China alongside the recent US-
China trade disputes will prompt
US manufacturers to rethink their
supply chain strategies and begin
localizing some aspects of their
operations.
▪ This repatriation of manufacturing
will lead to a quasi-renaissance of
American manufacturing, one
characterized by extensive use of
robotics, automation, and artificial
intelligence.

47. ▪ This resurgence of manufacturing will
likely lead to the creation of several
manufacturing jobs across the nation.
▪ Predictably, certain regions, namely the
Southeast and the Interior West, will
attract more attention due to their
business-friendly policies, low taxes, and
lower housing costs.

48. ▪ The three markets identified in this article warrant special
attention given the confluence of factors that make them
attractive destinations for manufacturing.
▪ As inland cities with strong infrastructure networks,
favorable business climates, and relatively easy access to
seaports, these three cities will disproportionately reap the
benefits from the onshoring of American manufacturing.

49. ▪ Multifamily investors in
these respective markets
will also experience
tremendous growth in the
valuation of their
properties in the form of
rental increases, land
appreciation, and
additional cap rate
compression.

50. ▪ In summary, well-located and well-built
multifamily real estate in these respective
markets will not only be one of the safest
investments going forward, but also the
wisest investment given the demographic
tailwinds that are propelling the demand
for multifamily real estate.