America’s sunbelt is attracting businesses eager to invest in the usually low-tax, low-regulatory states. Will Parker reports for The Wall Street Journal:
The U.S. is experiencing a manufacturing revival. More property investors are eager to capitalize on it.
American and overseas companies have committed nearly half a trillion dollars to build new factories for electric vehicles, semiconductors and other products in the U.S., according to real estate analytics firm Green Street.
Investors are planning to acquire or build warehouses, hotels, office buildings and apartments near coming factories across the Sunbelt and Rust Belt, where most of these so-called onshoring projects are under way. They are wagering that as new manufacturing hubs come online and create jobs they will produce a “multiplier effect,” with growing employment increasing demand for homes, shopping and more.
“Competition for land has become pretty intense,” said Mehtab Randhawa, global head of industrial research at JLL.
The biggest site of all is Taiwan Semiconductor Manufacturing Co.’s $65 billion chip fabrication complex, planned for the north side of Phoenix. It is funded by over $11 billion in federal subsidies and loans under the CHIPS and Science Act, which grants money to semiconductor makers.
In May, an affiliate of Mack Real Estate Group and McCourt Partners won a state-run bid to purchase more than 2,300 acres of land directly surrounding the site, where New York developer Richard Mack plans a “city of the future.” It calls for housing, hotels, restaurants and office buildings in 28 million square feet of developed space.
Real-estate projects geared toward new manufacturing sites offer a welcome opportunity for property developers after a tough stretch when other once-reliable investments have faltered. Downtown office markets, slumping under remote work schedules, show little signs of returning to where they were prepandemic. The retail real-estate sector has downsized considerably from a decade ago.
New manufacturing hubs pose risks
The Infrastructure Investment and Jobs Act of 2021, in which the federal government has pledged to spend more than $1 trillion, has helped spur some of this new manufacturing activity.Still, higher interest rates, an uncertain market for EVs and production delays hitting some new plants are among the obstacles. Many factories are years away from completion and developers will likely try to time the market. Cities and small towns also need to boost their infrastructure to support higher electricity and water use.
It is possible that many semiconductor and EV projects won’t pan out, and many are already taking longer to build than initially envisioned.
“All of these projects take so long to get up to speed,” said Vince Tibone, an industrial real-estate analyst at Green Street.
In Phoenix, semiconductor production at the first of three TSMC facilities is behind schedule. The company last year said it needed more time to train workers for a target start date sometime in 2025.
That hasn’t stopped Mack from betting big on TSMC’s eventual success. The plant itself is expected to create some 6,000 jobs, with potentially tens of thousands more created by businesses providing services to the plant or its employees.
“Our vision is to build an urban ecosystem around this job magnet,” Mack said. He hopes to begin initial site work in the next six to 12 months.
Property investors are also filing into other Sunbelt centers of chip and vehicle production, such as Texas and Tennessee.
Speculators have bid up the price of row crop fields by as much as triple near Brownsville, Tenn., said Mayor Bill Rawls. This town of 10,000 is about 15 miles from BlueOval City, the $5.6 billion electric pickup truck plant under development by Ford Motor and South Korean battery manufacturer SK On.
Action Line: Businesses are moving to states where politicians put the needs of residents and the economy ahead of their own personal political agendas. You’ll find a number of Sunbelt States among Your Survival Guy’s 2024 Super States, including Florida, Texas, Arizona, and Tennessee. Click here to subscribe to my free monthly Survive & Thrive letter.
