For decades, American companies sent manufacturing operations overseas in search of lower costs.
Cheap labor, fewer regulations and efficient global supply chains made offshoring the dominant strategy for everything from electronics to pharmaceuticals.
But the tide is turning.
Reshoring — the process of bringing manufacturing and supply chains back to the U.S. — has gained momentum in recent years. Supply chain disruptions during the pandemic, geopolitical tensions with China and rising overseas labor costs have forced companies to rethink their strategies.
Add in government incentives like the CHIPS Act and tax credits for domestic production, and reshoring are no longer just patriotic talking points, they are a business necessity.
While this shift brings economic benefits, one sector poised for significant gains is industrial real estate. Industrial space and logistics hubs are seeing increased demand as companies look to rebuild supply chains on American soil.
Industrial’s big moment
Manufacturing may have been outsourced, but demand for industrial real estate has remained strong, thanks to e-commerce. Now, reshoring is adding another layer of demand, particularly for manufacturing and distribution space.
Manufacturers looking to reshore need factory space, and they’re not just eyeing traditional industrial strongholds like the Midwest.
Texas, Arizona, and the Southeast are emerging as major reshoring hubs due to business-friendly policies, affordable land, and proximity to key transportation networks. Even California, despite high costs, is benefiting from semiconductor and biotech reshoring, thanks to its deep talent pool and access to ports.
With this shift, developers are repurposing outdated office and retail properties into industrial use. The conversion of big-box retail into warehouse and distribution centers is already happening, and underutilized office campuses could be next in line for transformation into R&D labs or advanced manufacturing facilities.
The logistics boom
Manufacturing doesn’t work in isolation. It needs a strong logistics network to move raw materials in and finished products out. That’s why reshoring is fueling growth in warehouse and distribution space, particularly in regions with easy access to rail, highways, and ports.
The trend is especially pronounced near inland logistics hubs like Dallas-Fort Worth and Atlanta, where vast warehouse developments are emerging to support reshored manufacturing operations. Port cities like Savannah, Charleston, and Los Angeles are also seeing an uptick in industrial activity as reshoring strengthens domestic supply chains.
Challenges to overcome
Reshoring isn’t a magic bullet. Companies bringing production back to the U.S. face significant challenges, including labor shortages, infrastructure gaps and higher operating costs.
The U.S. manufacturing workforce has shrunk over the years, and finding skilled workers is a growing concern.
Companies investing in reshoring must also invest in workforce training and automation to bridge the skills gap. Community colleges and vocational programs are beginning to step up, but this will be a long-term effort.
Another hurdle is infrastructure. While industrial construction boomed prior to 2023, roads, bridges and ports need upgrades to handle increased freight movement. Power supply is another issue, particularly for energy-intensive industries like semiconductor and electric vehicle battery production.
A long-term shift
Despite these challenges, reshoring is not a short-lived trend—it’s a structural shift that will reshape American industry for decades.
Advances in automation and AI are making domestic production more cost-competitive, and companies now recognize the risks of over-reliance on overseas supply chains.
For commercial real estate, this means continued demand for industrial space, adaptive reuse opportunities for underperforming assets, and expansion of logistics hubs. Cities and states that invest in infrastructure and workforce development will be the biggest beneficiaries of this new era of American manufacturing.
Reshoring is more than an economic shift — it can be a real estate revolution!
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.