Rapid growth of demand for housing and commercial space around major industrial projects in America is as old as, well, the industrial revolution itself.
From coal mining and textile company towns to the birth of the steel industry, these developments seem to happen overnight, and their impacts can last for, at this point, more than a century. One example: Birmingham, Alabama, still uses the "Magic City" nickname it earned when the steel industry took up shop there in the late 1800s and the city popped up out of nowhere as if by magic.
Then there's Detroit and automaking, as another example. A more recent example of that is the Greenville, South Carolina, area where BMW established an assembly plant that has transformed a region beset by textile's demise into an economic powerhouse in the span of a decade or two.
Image source: Getty Images.
Now, on to the next big wave -- and computer chips may be the biggest. There's been a sudden burst of major semiconductor manufacturers building massive new plants here in America as a result of supply chain snafus and surging demand that appears to have nowhere to go but up as the embedded technology becomes ever-more critical. Just ask automakers.
These are huge, long-term investments that present massive opportunity for spinoff activity, too, in the form of construction jobs at first, followed by suppliers and the jobs they create. And then residential and commercial growth that can extend well beyond the communities where the plants are actually located.
Just three examples represent thousands of new jobs and a lot of spinoff to come
Here are three notable developments:
- Intel is investing an initial $20 billion in a multi-factory semiconductor site near Columbus, Ohio, which will be the Buckeye State's largest such capital investment ever. The initial 3,000 jobs at the 1,000-acre site will pay an average of $135,000 each. That's in addition to the $20 billion Intel is putting into expanding its current operations at two factories in the Phoenix suburb of Chandler, Arizona.
- Samsung is working on a 1,200-acre site in the Austin, Texas, suburb of Taylor that represents a $17 billion investment and is expected to create about 2,000 new jobs in a 6-million-square-foot semiconductor facility that will join an existing company site in Austin itself.
- Taiwan Semiconductor Manufacturing Company -- whose chips are in every iPhone -- is building a $12 billion, 3.8 million square foot manufacturing campus to bolster its existing Phoenix operations. Related economic activity, including by homebuilders and ancillary suppliers, already has been announced while the new factory is still in the construction stage.
Global regionalization leads to local opportunity
So, could the chip shortage be an opportunity for real estate investors? The industry's response points to a clear "yes."
"This activity validates what we are seeing in the current real estate market regarding the regionalization of manufacturing" as overseas suppliers expand their U.S. operations, CBRE executive managing director John Morris told Commercial Property Executive in a Feb. 15 article.
He added, "Manufacturing investments like these do indeed create a cascading impact on local economies and on the logistics real estate markets in the area; these markets can certainly expect an increase in demand for logistics space to support tier 1 and tier 2 suppliers that will need to locate supply materials close to manufacturing plants."
Indeed, multiple published reports point to suppliers for these major chipmakers investing now in setting up shop to serve these sites, and residential and commercial development is sure to follow as well.
That makes now a good time for real estate investors to investigate their own opportunities in those areas as the opportunity pushes out from those sites well into the suburbs and rural areas surrounding all that activity.
After all, these are not short-term investments these companies are making. They're transformative and likely to be long lasting. Working with local brokers and developers, finding crowdfunding opportunities placed in those areas, and investing in real estate investment trusts (REITs) all could be ways to transform your own portfolio to leverage the opportunities presented by this critical manufacturing sea change.
