Electric vehicle numbers are on the rise and what that means is an increase in leasing activity and growth in manufacturing and industrial facilities across North America where the cars can be built and distributed. At the same time, the ramp-up is delivering several big challenges, according to a recent CBRE report.
Leasing makes sense for the specialized manufacturing and distribution centers these cars require rather than just owner-occupied facilities, which also exist. The leasing has been mostly bulk lease transactions in the U.S. with 100,000 square feet or more. These currently comprise 7 million square feet of the 7.9 million square feet of EV-occupied space leased in the first half of 2023 or 163% year-over-year growth.
Over the last five years, 15 markets have accumulated more than 1 million square feet of leased industrial space for EV occupiers. These deals total 28 million square feet or 73% of all EV leasing transactions in this time frame. The top five markets are Chicago, Detroit, Central Valley, Silicon Valley and Memphis, with Chicago having 3.6 million square feet and Memphis having 2.3 million.
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Yet with this growth comes challenges, CBRE noted.
First, is that there's adequate power available. EV vehicle and battery manufacturing is very power-intensive, the report said. The manufacturing facilities have special infrastructure needs, including a high-voltage power supply, battery assembly lines, charging foundation installation capabilities and advanced robotics and automation systems. All rely on what's termed stabilized energy flow, plus accessibility to power, for the sector's continued robust growth.
The second challenge is having a well-trained labor force with electrical engineers and technicians needed to design, develop and manufacture EVs and their components such as motors and batteries. Currently, there are 194,000 EV-specialized engineers but 200,000 are needed by 2027. Demographics may challenge this demand. Many aging workers may not be able to gain the new skills and requirements, though the hope is that training and education will address these needs.
A third challenge is for infrastructures to be revamped. The passage of the Inflation Reduction Act and the CHIPS Act increased the country's investment in domestic energy production and manufacturing, to meet the federal mandate to reduce carbon emissions by roughly 40% by 2030. Corporations have announced plans to locate manufacturing facilities across the country, but the typical project takes three to five years to go from planning and groundbreaking to becoming operational. Many facilities may need to be retooled, based on what's happened in Canadian facilities. For example, electrical capacity often has to be increased, and space is needed to store batteries and handle maintenance.
The fourth challenge is relieving supply chain pressures. Manufacturing EVs requires what's termed a fluid supply chain to source raw materials such as lithium, cobalt and rare earth metals, with many found abroad, including in China.
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