by Josh Bays, on Jan 18, 2022 10:18:31 AM
Despite continued uncertainty caused by various variants from the COVID-19 pandemic, it is clear that domestic site selection for the manufacturing sector remains as active as ever. Based on our market intel and experience, the upward trend seen in 2020 and 2021 is likely to continue well into 2022.
Site Selection Group, a full-service location advisory, economic incentive and real estate services firm, monitors critical industrial site selection data metrics to help our clients make informed location decisions. Many of our manufacturing clients are surprised to hear how tight resources have become in the middle of a global pandemic, specifically manufacturing workforce and industrial real estate.
One of the more frustrating aspects of data analytics in site selection is that most “traditional” data sources lag upward of one year. Therefore, it is difficult to assess the impact that significant economic events — such as the pandemic — are having on the marketplace in real time. However, there are a few reliable near-real time data variables, and this blog will help us understand key manufacturing site selection trends from 2021.
Unemployment data and job posting intensity suggest a tight manufacturing workforce
The chart below shows the national manufacturing sector unemployment rate by quarter compared to the overall national unemployment rate. The national manufacturing unemployment rate remained below the overall national unemployment rate which was a factor of the overall economic recovery.
Also included in the chart below is manufacturing job posting intensity by quarter. This is the measure of the number of unique manufacturing job postings in a given time period (quarter) relative to the number of total manufacturing jobs. While job posting intensity remained steady for most of 2021, we noticed a slight increase in Q4. This could be an effect of the tightening labor market caused by the decrease in manufacturing unemployment over time.
National Workforce Indicators | Production Sector
Source: EMSI, BLS
The table below shows which metro areas had the most and least drastic changes in manufacturing job posting intensity. This list is filtered to large metros (greater than 100 unique postings within each time frame to prevent small market outliers). The column on the right shows the change in posting intensity from 2020 to 2021. In a general sense, companies in those metro areas in the Top 5 were posting manufacturing jobs at a much higher rate by the end of 2021 than they were six months earlier, indicating a tightening manufacturing labor market.
Top
| Salt Lake City, UT | 9.20% |
| Las Vegas-Henderson-Paradise, NV | 7.50% |
| Seattle-Tacoma-Bellevue, WA | 4.50% |
| Virginia Beach-Norfolk-Newport News, VA-NC | 3.20% |
| Stockton, CA | 3.10% |
Bottom
| Dallas-Fort Worth-Arlington, TX | -34.10% |
| Charlotte-Concord-Gastonia, NC-SC | -29.80% |
| Philadelphia-Camden-Wilmington, PA-NJ-DE-MD | -29.60% |
| New York-Newark-Jersey City, NY-NJ-PA | -26.40% |
| Columbus, OH | -25.80% |
Source: EMSI
Industrial real estate statistics show declining vacancies
Although industrial real estate statistics are geared more toward the distribution sector than the manufacturing sector, they are a good indicator of availability and cost pressures in the marketplace.
The chart below shows national industrial vacancy rates over the last eight quarters plus the current projection for this quarter (Q1 2022). Although it appears vacancy rates were steady or slowly climbing, by mid-2021, there has been a strong downward trend.
National Industrial Vacancy Rate
Source: CoStar
The table below shows the five markets with the highest and lowest industrial vacancy rates. The markets with lower vacancy rate tend to be in California where the market has been active for quite a while.
Top
| Sandusky, OH | 11.60% |
| Macon, GA | 9.30% |
| Chambersburg-Waynesboro, PA | 8.60% |
| Jefferson, GA | 8.50% |
| Boulder, CO | 7.40% |
Bottom
| Inland Empire, CA | 1.70% |
| Los Angeles, CA | 1.80% |
| Orange County, CA | 2.20% |
| Lancaster, PA | 2.30% |
| Canton, OH | 2.60% |
Source: CoStar (filtered to markets with 1,000,000 or greater vacant SF)
The increase in industrial activity is further evidenced by an increase in national industrial market rents. Year-over-year rent escalation is at 8.4% for the industrial market with the current national average for this quarter at $9.77 per SF.
The table below shows the five markets with the highest and lowest 12-month market rent growth along with the associated average market rate per SF.
Top
| Market | Rent | 12 Month Market Rent Growth |
| Miami, FL | $15.13 | 15.00% |
| Northern New Jersey, NJ | $12.24 | 14.20% |
| Philadelphia, PA | $8.84 | 13.10% |
| Nashville, TN | $9.29 | 12.80% |
| Atlanta, GA | $7.24 | 12.20% |
Bottom
| East Bay, CA | $15.13 | 3.60% |
| Ann Arbor, MI | $9.21 | 4.60% |
| Saint Louis, MO | $6.04 | 4.70% |
| Houston, TX | $7.96 | 4.90% |
| San Jose, CA | $24.91 | 4.90% |
Source: CoStar
One of the most interesting industrial real estate trends to follow is construction activity. The table below shows the five markets with the most industrial square footage under construction as of the end of Q4 2021. Dallas-Fort Worth continues to significantly outpace the country as it relates to speculative construction.
| Market | Industrial SF Under Construction |
| Dallas-Fort Worth, TX | 62,272,000 |
| Phoenix, AZ | 36,484,000 |
| Atlanta, GA | 30,513,000 |
| Chicago, IL | 29,747,000 |
| Indianapolis, IN | 24,612,000 |
Again, Site Selection Group focused on data variables that are near-real time for this blog. Any site selection decision should be supported with a wealth of information more than what is demonstrated here. Regardless, 2022 is shaping up to be every bit as dynamic as 2021.
