Economy Watch: Could Reshoring be Good for Retailers?

Could reshoring help distribution facility ownership?

Reshoring seems to be a real thing, but will it help retailers (and their landlords) by providing more efficient distribution of their goods, and help distribution facility ownership by increasing demand for local industrial production? Could be, according to the Reshoring Initiative, an organization that promotes reshoring among U.S. manufacturers through asserting the profit potential of local sourcing and production. Recently the organization reported that in 2014 the country gained at least 10,000 manufacturing jobs as a result of reshoring: as many as 50,000 were offshored last year, but 60,000 were reshored.

That might not sound like very many jobs, and in an absolute sense, it isn’t. But compared with the early years of the 21st century, it’s a sea change. According to the Reshoring Initiative, for example, the U.S. lost a net of about 130,000 jobs due to offshoring in 2003. Since then there’s been a steady drop in losses due to offshoring, culminating with the net gain last year. The organization surveyed manufacturers about their increasing willingness to make things in this country, and the reasons included government incentives, access to a skilled workforce, capitalizing on the value of a “Made in USA” label, and improving automation.

The organization also reported that reshoring was strongest in the Southeast and Texas, which is consistent with predictions that those regions are becoming competitive with China in making products to be sold this country. There are several reasons for this: it’s easier to build new facilities in these states, which have more green field space; they tend to have lower taxes; and they also generally have lower wages and widespread anti-union attitudes. What does it mean for retail and industrial real estate, particularly in those states? Probably not much yet beyond the development of new manufacturing facilities, but the potential for growth is there as more jobs are reshored and more production takes place here.

A number of retailers are already expanding their domestic facilities. Examples, as cited by the Reshoring Initiative, include Chaucer’s plan to building a 100,000-square-foot freeze dry factory in Portland, Ore.; Barry Callebaut’s expansion of its manufacturing presence through a deal with World’s Finest Chocolate in Chicago; and the Dairy Farmers of America’s plans to build a plant in Kansas in partnership with Inner Mongolia Yili Industrial Group that will produce 88,000 tons of milk powder a year. Also, Chobani is opening a Greek yogurt plant in Idaho to provide goods to Walmart, which is actively buying more domestically made goods.