Yesterday Was A Good Day for Industrial Real Estate
EV and chip manufacturing is becoming increasingly important to this sector.
Dual announcements yesterday gave industrial real estate’s long-term prospects a significant boost, specifically those facilities that cater to EV and semiconductor manufacturing.
In one development, the Environmental Protection Agency issued new tailpipe pollution limits that ensures the majority of new passenger cars and light trucks sold in the US by 2032 are all-electric or hybrids. The rule phases in limits to the amount of pollution allowed from tailpipes over time so that in eight years more than half the new cars sold in the US would have to be zero-emissions vehicles for carmakers to meet the standards.
In the other, Intel described plans for a $100 billion investment to build and expand factories in four US states after it secured $19.5 billion in federal grants under the CHIPS Act and expects another $25 billion in tax breaks.
Within three years it plans to build “the largest AI chip manufacturing site in the world”, near Columbus, Ohio, according to CEO Pat Gelsinger and also will revamp sites in New Mexico and Oregon and expand operations in Arizona.
These announcements highlight why advanced tech and EV manufacturing has become so important to industrial real estate’s long term growth.
According to CBRE, bulk lease transactions comprised seven million square feet of the 7.9 million sq. ft. of EV-occupied space leased in H1 2023, representing 163% year-over-year growth.
It also says there are 15 markets where over one million square feet of industrial space was leased to EV occupiers in the last five years, with the top five being Chicago, Detroit, Central Valley, Silicon Valley and Memphis. These deals total 28 million square feet, representing 73% of all EV leasing deals over this time period.
These investments are already affecting the industrial pipeline for 2024, a separate report by CommercialEdge finds.
For instance, Phoenix is poised to deliver the most new industrial supply nationally this year with 42.5 million square feet and of the five largest projects underway in the metro, two are manufacturing properties — TSMC’s chip plant and Lucid Motors’ EV factory.
Then there is Savannah, which has just under 30 million square feet of new industrial space in the works, placing it third nationally – more than half of it is due to Hyundai’s mammoth EV manufacturing plant, which will total 17 million square feet.
Meanwhile Austin’s largest developments currently being built are both manufacturing facilities: Samsung’s semiconductor factory in Taylor, Texas, will total 6 million feet of space, whereas Tesla’s 1.4-million-square-foot battery cathode building is being added to its Giga Texas factory.