Though the United States has been losing manufacturing jobs for decades, that trend is now reversing. Both Donald Trump and Joe Biden support expanding U.S. manufacturing operations, according to Marcus & Millichap’s 2020 Presidential Election Special Report. However, the candidates’ differing approaches to increasing U.S. production could help or hinder the industrial real estate sector.
Reshoring – bringing manufacturing jobs back to the U.S. from overseas – is more feasible as production becomes more technologically complex and automated and the reliance on lower-skilled labor declines.
“Declining labor costs lower the incentives for companies to distance their supply chains to other parts of the globe, especially when the recent health crisis has highlighted the drawbacks of a multinational supply chain,” according to the report. “Over time, this trend will support the development of U.S. production processes across a range of industries, raising demand for domestic manufacturing space.”
That increased demand for manufacturing space will juice industrial investors’ interest in manufacturing buildings. The industrial sector is already enjoying tailwinds from the continued growth of e-commerce, according to the report, and Marcus & Millichap expects the outcome of the election “may sway this trend further.”
Biden has proposed new federal funding and tax incentives to increase the purchasing of American-made goods, accelerate domestic research in leading technologies, and revitalize older industrial properties. Marcus & Millichap’s report noted that achieving these goals is more likely under a Democratic Congress.
Trump, meanwhile, is unlikely to have a unified legislature until at least 2022 and will be forced to utilize other methods to achieve his reshoring goals. In his first term, President Trump supported domestic production via executive order and increased import taxes “at the cost of higher international tensions.”
According to Marcus & Millichap’s report, Trump’s phase one trade agreement with China will have to be renegotiated because of the pandemic’s disruption to global shipping. This could possibly spark “renewed hostilities” that “could spill over into financial market volatility” and cloud investor sentiment, which happened last year.
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