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By Matt Mowell, Jamie Portolese, Dennis Schoenmaker, Ph.D.

Products manufactured in the U.S., and the markets where they are manufactured, continues to evolve. Looking at how each metro’s share of U.S. manufacturing employment has changed since 2010 provides a glimpse into this evolution.

Such regional shifts are most evident along the Accela Corridor, in the cluster of red highlighting that region’s relative decline in manufacturing employment. The region has exposure to some high-growth production industries, such as pharmaceutical manufacturing, but it is not enough to keep pace with the Southeast, which has enjoyed a manufacturing renaissance during the past decade after many textiles and furniture producers left metros such as Greensboro, N.C. in the 1990s and 2000s. But during the past decade, the Southeast’s lighter regulatory regime and lower cost structure are making the I-85 Corridor—from Atlanta to Raleigh—a hub for production of everything from autos to computing equipment and machine tools. The ports of Charleston and Savannah further bolster the region’s position as a manufacturing center.

Like the Southeast, manufacturing is prominent in Western cities like Austin, Phoenix and Reno that benefit from new factories and capital stock capable of building high-value goods. Interestingly, high-cost California has expanded its manufacturing as it retains a competitive edge in producing aerospace, chemicals, computing equipment and other extremely high-value goods. Los Angeles is a notable outlier reflecting its heavy exposure to lower-value sectors, such as garment making.  

The Midwest accounts for just over one-third of U.S. manufacturing employment, just ahead of the South. The region has winners and losers, especially as automakers have consolidated operations into places like Detroit and Louisville, but at the expense of places like Northeast Ohio. Looking forward, the region’s sizable capital stock and manufacturing workforce, combined with an increased propensity to onshore manufacturing, will pay dividends, as exemplified by Intel’s Central Ohio investment.

Manufacturing matters because it tends to have a higher multiplier effect on a region’s economy than does the services sector. It stimulates industrial space demand for both factories and warehouses. Although e-commerce-fueled bulk logistics space is the darling of the current cycle, manufacturing space is an interesting niche market that offers investors higher cap rates. Particularly attractive markets include the I-85 Corridor, Texas and the Intermountain West (e.g., Phoenix and Reno).