Nearshoring drives demand in US-Mexico industrial real estate and infrastructure markets
Government grants are not designed to cover 100 per cent of the build cost, however. “There’s an expectation in the US that the federal government will provide 25 per cent, state and local governments should provide 25 per cent, and then the private sector should come in with the other 50 per cent that’s needed to fund these projects,” comments Don Trent, Senior Managing Director, in the Semiconductor and Technology team within Commodities and Global Markets. “We’ve had a lot of discussions with our clients in terms of how we help secure funds, as well as provide that supplementary funding that they’re going to need from the private sector.”
Macquarie also provides semiconductor businesses with help managing and investing their cash for better returns so that they address the long build times for new facilities.
US policymakers envision utilising Mexico as part of a broad North American ecosystem that will include manufacturing, testing, packaging and assembly.10 The goal is for companies manufacturing in the US Sun Belt to use Mexico for supportive functions in the supply chain, some of which may be labour-intensive. Firms such as Intel, Skyworks Solutions, Texas Instruments and Infineon Technology are already in Mexico and continue to build capacity in the microprocessor R&D, testing and manufacturing spaces.
Those advocating onshoring and nearshoring in this industry must also consider the available energy and infrastructure. Manufacturing requires energy, transportation and resources; it also creates waste. It is water intensive, potentially causing problems for the thriving chip manufacturing industry in Arizona, one of the US’ driest states. “Providing the inputs and mitigating the outputs requires sophisticated infrastructure, and that’s not easy to replicate,” explains Doering.
The future of nearshoring and supply chain diversification
Nearshoring and onshoring are going to have an impact on the world economy and will lead to a shift in trade patterns, but this will not lead to a complete abandonment of globalisation and a retreat to regionalisation. “We call it trade diversion. Global trade is being rerouted,” David Doyle, Managing Director, Head of Economics, Commodities and Global Markets comments. “Things will look slightly different than they do today in the sense that you will have more regional, bifurcated trade. The US is still going to have substantial trade with Asia in five or ten years’ time, it’s just that there will be certain areas that will continue to attract greater attention from policymakers.”
By 2035, 45 per cent of supply chains are expected to be mostly autonomous, utilising automation such as robots in warehouses and stores, driverless forklifts and trucks, delivery drones and fully automated planning, according to a 2022 EY report15 based on a survey of 200 senior-level supply chain executives. The growth of automation may well reduce the necessity to offshore production to countries that offer lower labour costs, but a human skills base will still be required for onshore and nearshore manufacturing, particularly in the areas of technology.
“We’re really thinking about this as a multi-decade type change in the way that the world does business from a manufacturing and trade perspective,” says Hanna. “These sorts of changes don’t happen overnight, or even in the space of a year. We see them as long-term changes over time and expect them to drive increased investment and demand in areas such as industrial real estate in Mexico over many years.”
