Crain’s: What types of companies are bringing more manufacturing to Chicago?
John Cassidy: Intel’s $20 billion investment in a new cutting-edge chip manufacturing campus in Ohio is one of the country’s most prominent reshoring stories. The massive undertaking will create 7,000 construction jobs across a 1,000-acre site and help meet the surging demand for advanced semiconductors. The impacts will be felt not only across Ohio as thousands of employees, partners and suppliers ascend, but also across the broader U.S. semiconductor ecosystem.
However, in the Chicago area, we haven’t had that same headline-driving mass reshoring project. But that doesn’t mean reshoring isn’t happening here. The steadily increasing demand for mid-sized manufacturing buildings indicates a rising tide as manufacturers show bullishness for Chicago’s central location, transportation infrastructure and (relatively) cheaper costs when compared to the coasts.
Gummy bear maker HARIBO, for example, recently opened its first-ever North American manufacturing facility, located just over the state line in Pleasant Prairie, Wisconsin. That project produced about 400 regional jobs. And the new claim to fame for Elgin? This Northwest suburb of Chicago is now home to the second-largest corrugated box manufacturing facility in North America since Atlantic Packaging built a 460,000-square-foot plant there.
Crain’s: What do manufacturers want (and need) in their facilities?
Cassidy: Today’s industrial buildings must support automation and evolving digital manufacturing technologies like 3D printing and robotics. This makes power capacity and dependability– and associated cost– an important consideration in site selection. More parking is needed because regardless of automation, manufacturing requires a larger labor force than warehousing.
Manufacturers are grappling with talent shortages and a need to fill new types of jobs – for example, data scientists that help optimize industrial processes. So, companies are using high-end finishes coupled with gyms, coffee bars, and collaboration areas – once unheard-of amenities for industrial facilities – to attract that talent.
Crain’s: What hurdles are affecting the reshoring effort in Chicago?
Sam Badger:
- Lack of buildings. Overall, Chicago’s industrial market has dipped to a historic low of 2.5% according to CBRE’s Third Quarter 2022 Chicago Industrial Market Report. There has been a huge uptick in manufacturers wanting to own versus lease their own facilities, but not enough inventory available to satiate that demand.
Typically, manufacturing companies are interested in customized build-to-suit facilities. But it’s important to know that you’ll potentially need 18 months, at minimum, to build it. In a time-sensitive industry – something like plastic injection molding or pharmaceuticals – building to suit may not even be an option. And transitioning to a pre-built facility may not give you the power, parking or automation you need. There is simply too large a capital investment required to make a vanilla warehouse work for advanced manufacturing operations. - Economy is shaky and construction costs are high. Uncertainty in the debt markets, rising interest rates, the potential for a recession, and construction costs are causing developers to hold back on new projects. Even if you’ve got the time to build your own facility, it will come at a premium.
- Labor is precious and pricy. When manufacturers started offshoring years ago to save on labor and production costs, the result was a sharp decline in attendance at vocational and trade schools, causing a severe shortage in skilled labor positions like construction and manufacturing.
According to a study by Deloitte and the Manufacturing Institute, the manufacturing skills gap in the U.S. could result in 2.1 million unfilled jobs by 2030 at a potential cost of $1 trillion in 2030 alone.
Crain’s: Where do manufacturers go from here?
Badger: It took the…
Read More: Has the reshoring wave reached Chicago?