Commercial Investment Real Estate January/February 2017 | Page 12

MARKET
FOR ECAST
The Comeback Kid
U.S. manufacturing is a big contender again.
he U.S. manufacturing industry is showing signs of
a comeback, after hitting its peak in the late 1970s.
According to a 2015 Boston Consulting Group report,
there has been a 250 percent increase since 2012 in the
number of executives at large U.S.-based manufacturing compa-
nies who said their companies are actively reshoring production.
The report concludes that reshoring has become a reality for
many U.S. businesses.
Lower labor costs and tax advantages drove manufacturing
for U.S. corporations overseas. While these factors still influence
manufacturing decisions, proprietary technology is now even
more critical to their long-term success. As domestic companies
flirt with reshoring, the tipping point may be an advantage the
U.S. had all along: robust intellectual property protections.
T
Technology Matters
Many companies now view manufacturing processes and tech-
nology as their crucial differentiators and are aggressively pro-
tecting them. In industries where competition is based primarily
on cost, these factors are critically important to maintaining a
competitive edge.
For example, look at 3D printing, which has significantly
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January | February 2017
shrunk the production time for many products in the last decade.
Basic factories can be built and brought online relatively quickly.
However, 3D printing technology to produce a particular product
is much harder to replicate.
Companies now see the proprietary technology that runs their
factories as the real asset to protect. If U.S. firms export it to
countries with lax property rights protections and enforcement,
they are exposed to multiple risks.
Commoditized industries are especially susceptible to intellec-
tual property theft, since competition is primarily based on price.
Consider the apparel business and the market for T-shirts, for
example. Any technology that allows manufacturers to develop
this product at a lower price point represents a significant advan-
tage over the competition. Exporting that technology to a coun-
try where it could easily be replicated and used to produce an
identical product for a competitor is potentially devastating for
the manufacturer.
U.S. companies are not the only ones eyeing the United States
for its intellectual property protections. German companies,
including the Berghoff Group and Schmidt Maschinenbau
GmbH, recently located production facilities in Auburn, Ala.,
placing them in a country where technology is more secure.
COMMERCIAL INVESTMENT REAL ESTATE
by KC Conway