U.S. Location Strategy Trends in Advanced Manufacturing

Advanced manufacturing leverages innovative technologies to increase a company's competitiveness, productivity and efficiency for production operations. This new era of manufacturing means that companies can better weather operational disruptions, encourage adaptability and optimize all elements of the production value chain. Advanced manufacturing operations are a key part of several important industries such as renewable energy, electric vehicles (EVs), batteries and semiconductors.

Figure 1: What’s driving advanced manufacturing activity?

Source: CBRE Americas Consulting; Lightcast, Q3 2023.

One of the primary limitations to the U.S.’s advanced manufacturing position is the availability of qualified talent to meet increasing demand. There is a shortage of existing talent with the right qualifications and technical experience for the number of open positions, according to Lightcast data. Record-low unemployment rates in the skilled trades nationwide exacerbate this challenge. This highly competitive environment will likely present significant talent retention and attrition challenges for employers going forward.

Figure 2: U.S. Manufacturing Talent Supply Percent Annual Change

Source: CBRE Americas Consulting; Lightcast, Q3 2023.

Figure 2 displays the percent annual change in total volume of existing manufacturing talent nationwide. The pandemic caused supply to decrease by nearly 6% as workers chose different careers, retirement or other alternatives. Manufacturing jobs rebounded in 2021 and 2022, but data projects a decline in available skillsets over the next five years.

All skilled trades have seen a recent surge in demand. Welders, Computer Numerical Control (CNC) operators, and tool and die makers are the most in-demand occupations and skillsets, based on a review of CBRE Americas Consulting clients’ needs. Other highly skilled engineering roles—including automation, electrical and mechanical engineers—critical to the manufacturing ecosystem have also seen demand increases.

One way to measure a market’s talent risk is to compare the available supply to the demand for the same skill sets. This ratio is derived by taking the total pool of qualified talent in a market divided by the number of unique job postings (demand). Figure 3 identifies five of the most difficult occupations to fill in the advanced manufacturing space. Each occupation title, as defined by the Bureau of Labor Statistics, is matched to common job titles for which many operations hire. Maintenance and Repair Workers has the largest talent pool but also has the highest demand, giving it a higher overall risk for talent acquisition and retention.

Figure 3: Which manufacturing jobs are hardest to hire?

Source: CBRE Americas Consulting, Lightcast, Q3 2023.
¹ The hiring risk is measured by the ratio of the talent pool compared to the total annual unique job posting demand volume.

The two primary forces driving the manufacturing skills gap are an aging workforce in traditional, heavily unionized manufacturing markets, and a lack of talent development infrastructure in emerging manufacturing hubs. While the country reshapes its manufacturing sector, this skills gap will likely persist.

Historically, the U.S. manufacturing industry was heavily concentrated in the Rust Belt states, stretching from the Midwest to the western part of New York. Because of the long history of manufacturing activity in these states, many production operations are unionized, which is often associated with higher overall labor costs. Although this region has the skilled talent that many operations seek (including those with advanced manufacturing needs), many workers are mid-career or nearing retirement, commanding higher wage rates.

The emerging manufacturing hubs, where many recently announced advanced manufacturing projects are locating, are typically in Southeastern states that have some of the country’s highest population growth rates. In these states, the private and public sectors will have to strategize to reduce the stigma that has developed around the skilled trades, reframing people’s perceptions that these jobs provide less opportunity and mobility than white collar occupations. Some manufacturers are familiarizing students as early as fifth grade with advanced manufacturing career paths and opportunities, to combat the misconception. The main challenge is that these schoolchildren can be as young as 12 years old, so there is a significant gap between now and when they will be entering the workforce.

Workforce training and development programs are also key to addressing the skills gap. While most regions have these programs at both the state and market level, companies that choose to partner with established programs will likely have higher levels of success with talent attraction and retention.

Company decision makers often consider locations offering a combination of business friendliness, lower labor costs and higher quality of life when establishing a presence in a new market. The Southeastern U.S. has seen an increase in project announcements based on many of the aforementioned benefits. States like Tennessee, North Carolina and Georgia have been successful at winning many big projects, as have markets such as Columbus, Louisville and Indianapolis. However, the CHIPS Act and Inflation Reduction Act (IRA) , two major industrial policy laws that provide incentive funding to manufacture products domestically, are written so that the available funds are geographically dispersed. We are currently seeing the first wave of activity leveraging the incentive funding, but as domestic manufacturing operations grow there will likely be location diversification. Over the last three years, approximately 30 battery factories have been planned, under construction or operational across the U.S., according to TechCrunch. Many of the auto industry’s biggest players—including BMW, Honda, Ford, General Motors, Toyota, Tesla, Rivian, Stellantis, Hyundai and Mercedes-Benz—have announced new battery plants or electric vehicle factories.

Figure 4: Advanced Manufacturing Job Growth in High-Volume Geographies

Source: CBRE Americas Consulting; Lightcast, Q3 2023.
Map depicts manufacturing job growth by metropolitan statistical area for regions that have experienced an increase in advanced manufacturing activity.

The availability of pad-ready sites is another important component in the manufacturing location decision. Once a state or market has passed the first set of evaluation criteria, the focus shifts to the availability of pad-ready sites. A pad-ready site is one that is primed for new construction and ready for immediate development, meaning that site improvements such as land grading and utility extensions are already complete. The availability of pad-ready sites can help occupiers increase their speed-to-market. Communities that collaborate with all relevant stake-holders, including but not limited to economic development, zoning, utilities and permitting to address any challenges can assemble a viable pad-ready site relatively seamlessly.

The number one factor in winning the competition for highly skilled talent is how much you pay. Wages are the key differentiator in attracting and retaining manufacturing talent, according to CBRE research and market experience. Many ultra-competitive geographies see talent turnover for pay rate increases as little as $0.25/hour. However, as competition for key skillsets has increased, so have wages. Figure 5 shows the five-year historic wage appreciation for manufacturing talent in select U.S. metros.

Figure 5: Five-Year Historic Wage Appreciation for Manufacturing Skillsets in Select Metros

Source: CBRE Americas Consulting; Lightcast, Q3 2023.

While a company’s wage strategy will ultimately drive its success in attracting and retaining talent, extra amenities and cultural environment are often what will make employees stay (assuming wages are highly competitive). Many of CBRE’s manufacturing clients are implementing new amenity strategies that have largely been offered to office workers, such as childcare, food trucks and thoughtfully designed breakrooms. Although these can enhance the employee experience, the most compelling non-wage related recruitment and retention tool is positive word-of-mouth recommendations in the community. Companies that succeed with the cultural intangibles by going above and beyond to treat employees well will ultimately have the most success with talent.

Discretionary state and local government cash grants are the most compelling incentive offering for large-scale advanced manufacturing projects. This is essentially a sum of cash provided by the state or local government for companies to use for certain business activities. Most discretionary cash grants have associated “clawbacks” to ensure the manufacturer meets economic impact thresholds as described in the incentive negotiation process. Typically the more distressed the community, the more likely these types of incentives will be offered. Other favorable incentive offerings include infrastructure cost offsets and property tax abatements.

As advanced manufacturing activity continues to accelerate in the U.S., CBRE Americas Consulting sees three primary challenges for the industry.

The advanced manufacturing industry will likely continue to grow in the U.S., due to its mature technology industry, access to innovative ideas and highly skilled technology professionals. Much of this talent specializes in areas such as artificial intelligence, process automation and engineering, which will be key to advancing technology in this sector. However, equally important is the availability of production and manufacturing talent nationwide. In today’s highly competitive talent environment, the tradeoffs that are part and parcel of every site selection and location decision become more important to ensure the long-term success of the industry. Location decisions should consider all potential factors that will ultimately lead to a successful operation by limiting risk through a data-driven decision process.

About CBRE Americas Consulting:

CBRE’s Americas Consulting Location Strategy practice helps clients with complex location strategy decisions that take into account a myriad of important location factors, such as workforce strategy, site selection and incentive negotiation.