1st Quarter 2015
Market Watch
by Joe A. Hollingsworth, Jr.
So, the government just announced that unemployment is at 5.6%. You have to ask yourself is that even relevant anymore? How many people do each of us know that have given up looking for work or have figured out a way to get government assistance or are underemployed? For the last four years, we have clearly been losing the job war in productivity as the below chart shows.
Why is this important to industrial real estate? Manufacturing and distribution clearly drive the need for more square footage, and over 200 major companies have had announcements of onshoring their manufacturing operations, thus creating a lot of highly productive jobs. The onshoring of manufacturing jobs clearly is a driver just like innovation, technology, and entrepreneurship are drivers; and, each of us have seen the benefits of those four drivers during America’s most prosperous times.
Our view is that America is getting its feet under itself, and this productivity decline is reversing its trend. The huge energy realignment in America is beckoning energy-dependent companies to onshore, and lower energy prices can fuel America’s GDP by at least one-half of a percentage point. Most importantly, the four drivers as mentioned above are finally being acknowledged once again as providing prosperity for the individual as well as the country.
As a company, we are seeing a much higher percentage of manufacturing inquiries, and these have not been small value-added products but instead have been new products or reconfigurations to greatly increase efficiency. The need for this more efficient production is driving companies to consider new build-to-suits instead of adapting old facilities to their current needs, and this is going on despite the higher prices for new construction. This is what productivity increases are based on, and they result in more worldwide market share, thus more high paying manufacturing jobs being created and moving the productivity growth charts.
While each of us get an overload of domestic and worldwide news which much of it is negative, it is good to keep in mind that the underpinning of America (the creation of good paying jobs) is beginning to come in to full bloom. The onshoring of jobs, innovation, technology, and entrepreneurship are at play again, and Adam Smith’s invisible hand of prosperity is beginning to be felt.
