The compounding effects of the pandemic, climate change, and geopolitical tensions have shifted the economy, with domestic manufacturing becoming a top priority. As such, the U.S. is reshoring sensitive industries to shorten supply chains by fostering economic interdependence with Canada and Mexico—increasing domestic manufacturing and opportunity within CRE.
Invent Here, Make Here Act
An executive order to prioritize domestic manufacturing of innovations developed in the United States with United States federal funding. This is a continuation of government policies enacted in the 1980s that later spurred the internet boom and led to American technology dominance, the Bayh-Dole Act. This act enabled universities, national laboratories, and researchers to patent, license, and collect royalties on inventions developed with federal assistance, much of which was initially part of DARPA, the Defense Advanced Research Projects Agency. This new “Invent Here, Make Here” focus may do what this older act did for space, robotics, advanced pharmaceuticals, artificial intelligence, and other cutting-edge industries for internet startups and social media companies.
Chips and Science Act
A strategic move to reclaim U.S. leadership in semiconductor manufacturing and related industries by providing $50+ billion in semiconductor research and $39 billion in manufacturing incentives, as well as generous tax incentives to secure domestic chips production and rebuild the U.S. semiconductor supply chains. These manufacturing facilities will act as catalysts to create high-tech clusters of specialized labor pools, supplier linkages, and knowledge spillovers to related industries in those select markets.
Tech Hubs Program
Initiated under the Chips and Science Act, the Tech Hubs Program aims to foster innovation, strengthen manufacturing, and create quality jobs in 31 tech hubs across 32 states and Puerto Rico. These hubs will work in conjunction with state colleges and focus on industries of strategic economic interest, such as autonomous systems, quantum computing, biotechnology, clean energy production, semiconductor manufacturing, and more. The program aims to spread innovation away from the traditional coastal cities, ensuring that nearly three-quarters of the benefits will be in small and rural areas. The goal is for these small areas to specialize and attract talent and labor to spur specialized manufacturing clusters in traditionally underserved communities.
Additional U.S. Incentives
The U.S. is also enacting direct subsidies, tariffs, and executive orders that ban U.S. investments in sensitive industries overseas. Some of the indirect impacts of these increased trade barriers include:
- Increased Foreign Direct Investment: German companies such as Volkswagen, BASF, and Mercedes-Benz have announced increased investment in the United States due to tax credits and loans as part of U.S. industrial policy. These increased investments reflect a strategic shift in deteriorating conditions between Germany and China and broader challenges Germany faces within the EU, such as overregulation, high production costs, limited energy availability, and tight skilled labor markets.
- Nearshoring through Mergers and Acquisition: In December 2023, Nippon Steel announced it was willing to purchase U.S. Steel in a $14.1 Billion acquisition. This drive by Nippon Steel is to expand steel production in the U.S. to take advantage of U.S. infrastructure expansion while avoiding the 25% tariffs imposed on foreign steel imports. Foreign mergers and acquisitions are likely to become more frequent as foreign companies look to acquire U.S. operations to gain market access, avoid increasing trade restrictions, and take advantage of U.S. subsidies while shortening supply chains and increasing resilience.
With a focus on increased U.S. manufacturing based on an economic decoupling with China, public expenditure on infrastructure and energy investments, and a do-what-it-takes attitude to maintain U.S. global dominance in research, development, and the commercialization of technology innovations, the government is playing a more significant part in directing the economy, providing opportunities for forward-thinking CRE investors, developers, and tenants alike.