Labor, energy and infrastructure are the main factors that determine where advanced manufacturing facilities are developed, and water is among the most critical pieces site selection professionals consider.
Advanced manufacturing facilities, like the $20 billion project Intel is building in New Albany, Ohio, use massive amounts of water that draw down aquifers, and the systems in many municipalities already are near their peak capacities.
Water Scarcity
Intel has another $20 million project in Arizona and one valued at $3.5 billion in New Mexico, both Western states where water is scarce.
"Water is the new oil," said Robert Hess, vice president of global strategy at Newmark. "Arizona, Nevada, Texas and other Southwestern states are struggling with water."
Although there is increasing demand for advanced manufacturing facilities, ensuring they have enough water to operate is a struggle.
"Many places are close to their peak capacity," Hess said. "If you're a 10-million-gallon-a-day small town and a data center comes in and takes 1 million to 2 million gallons for cooling, they took your excess capacity. It takes years to design and permit and get a new water treatment plant up."
For now, the water issue isn't as bad as it seems, but Hess cautioned that municipalities should plan now to meet the future needs of manufacturing facilities.
Nearly $400 billion in investments, 210,000 new jobs and a minimum of 250 million square feet of new industrial projects are expected to come between now and 2030, according to the Newmark report.
The strongest concentration of projects is in the Midwest and Southeastern states, with Arizona and Texas leading in investments with a combined $106 billion.
The Labor Shortage Challenge
A tight labor supply is another issue confronting the advanced manufacturing sector, and many companies are solving the problem by locating their facilities near technical colleges.
"My colleagues in site selection talk about employees not needing a four-year degree to work in this industrial expansion," Hess said. "They're saying give me a one- or two-year degree person with a good attitude and we'll train them the rest of the way."
Although trade tensions between the U.S. and China were present before the onset of the pandemic, the following two years revealed the fragility of the global supply chain and has given rise to nearshoring.
Advanced manufacturing imports from Canada and Mexico into the U.S. have accelerated since 2020, and in the first half of this year, Mexico outpaced China to become the top advanced manufacturing exporter to the U.S. In 2022. Imports from China declined 23% from the first half of 2022.
Advanced manufacturing imports from Canada amounted to $20 billion in the first half of 2023, up 16% from the first half of 2022. Imports from Mexico amounted to $75 billion, up 3% from the first half of last year.