Green Manufacturing Sparks Industrial Real Estate Growth

Photo credit: Steve Jurvetson/Flickr

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You say you want a green revolution? Well, you know, it’s already well underway — at least if industrial real estate is any indicator.

Green-focused industries — such as manufacturing electric vehicles, solar panels, batteries, and all other parts of their respective supply chains — are exploding, taking up more industrial real estate than ever before, according to a recent analysis from The Wall Street Journal. And, in more ways than one, it couldn’t come at a better time.

The Green New Real (Estate)

For anyone with a healthy (or unhealthy) amount of climate change anxiety, green industry’s growing footprint is good news. But of course, as anyone with climate anxiety knows all too well, there’s always bad news. And Wednesday delivered a heavy dose of gloom: Scientists at the World Meteorological Organization, a United Nations agency, published a report saying global temperatures are likely to rise to record levels in the next half-decade, breaching the 1.5 degrees Celsius above pre-industrial levels threshold that governments agreed to avoid in the Paris Agreement (experts typically define 2 degrees of warming as the true catastrophe zone).

Happily, the US government’s near-endless bag of green energy subsidies is having a salubrious impact. Compared to a year ago, EV and EV parts-makers have more than doubled their leasing footprints in the first quarter of 2023, according to data from real estate group CBRE. That surge is not just good for the environment, but for real estate developers in a post-pandemic, post-interest rate hike lull:

  • After massively expanding logistics operations, e-commerce players are now pulling back on industrial leasing space. Overall, e-commerce companies signed some 4.7 million square feet worth of new industrial space in 2023’s first quarter, down from 13.7 million last year, according to CBRE.
  • Green manufacturing is filling some of that void. EV and EV-parts manufacturers and distributors saw new leasing space jump to 3.4 million square feet in Q1 compared to just 1.5 million a year ago, CBRE found.

Construction for green manufacturing space more than doubled last year, with automotive and energy-related companies “taking a bulk of that space,” Stephanie Rodriguez, national director of US industrial services at real estate firm Colliers, told the WSJ.

Power Play: Whether green manufacturers can keep the lights on in their new factories is another question entirely. On Wednesday the North American Electric Reliability Corp., a regulatory group that monitors the stability of the power grid, said that this summer’s heat waves are likely to threaten the US southeast with grid blackouts for the first time ever. In other words, Georgia and Alabama are about to get a little taste of California life. Let’s just hope this green manufacturing wave is producing lots and lots of solar panels.