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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   March 2014

Reshoring: The Return of Opportunities

Relocating from overseas, U.S. manufacturing businesses bolster the greater Seattle area’s industrial sector

Reshoring: The Return of Opportunities

Reshoring — that is, U.S. companies moving their offshore productions back to the U.S — is a growing trend across the nation. It offers a great deal of potential business opportunities for commercial mortgage originators. The greater Seattle/Puget Sound industrial real estate market is a prime example of a region ready to take advantage of it.

Reshoring is particularly a hot topic in manufacturing circles. U.S. manufacturers have been repositioning their facilities because of increasing labor costs overseas, higher fuel costs for extended supply chains and the need for tighter quality control. Additionally, loss of intellectual property with little to no offshore protection or meaningful regulation is compelling many companies to consider relocating to U.S. soil.

Among the benefits companies cite for reshoring are: closer proximity to research and development facilities; decreased supply chain costs and improved quality supervision of the manufacturing process. Local communities also benefit greatly by the addition of new jobs and an increased tax base, often thought lost forever overseas.

All of these benefits create a perfect environment for new demand for commercial mortgages. It is therefore important to monitor this trend closely to ensure you’re not missing out on opportunities landing right on our shores.

In a study released by the MIT Forum for Supply Chain Innovation in January 2013, 33.6 percent of the manufacturing respondents stated they were “considering” reshoring options, while 15.3 percent said they were “definitively” planning to reshore. Although these percentages are not high, in a global economy this movement is a significant business trend that savvy mortgage professionals should monitor and be prepared to take advantage of.

Seattle/Puget Sound

An in-depth look at the Seattle and greater Puget Sound commercial real estate market in the context of reshoring — particularly in terms of available land for manufacturing and ports — provides an instructive example of the lucrative potential opportunities for commercial real estate finance professionals.

As the “jumping-off” point to the Pacific Rim, the Seattle/Puget Sound market is also the “jumping-in” point back into the United States. This market attracts manufacturing companies related to the aerospace industry, as well as other employers in need of a high-quality workforce, abundant lifestyle choices, and a close proximity to ports, rail service and interstate transportation.

This market also has an abundance of affordable land available for development that is already zoned and has the necessary infrastructure and amenities for manufacturing sites. Prime examples of this are Washington’s Sumner, Fife and Fredrickson submarkets in the Kent Valley, along with the Everett, Mukilteo and North Snohomish submarkets in the Northend market.

A number of these manufacturing regions have both the industrial space and distribution space that can be easily retrofitted to a manufacturing facility. For example, vacated distribution space can be turned into manufacturing by creating parking stalls where truck parking was once located, adding climate-controlled production areas and enhancing the power service to the building.

Kent Valley

The Kent Valley lies roughly equidistant between the ports of Seattle and Tacoma and offers access to Boeing’s Renton facility. This geographic market is wedged between Interstate 5 to the west and U.S. Highway 167 to the east, with Renton and Tukwila in King County as the northern boundary and Fife and Puyallup in Pierce County at the southern end.

With an inventory of about 25 million square feet, manufacturing space makes up more than 25 percent of the overall Kent Valley idustrial market, but vacant space is extremely tight at just 2.16 percent as of this past third quarter. That makes retrofitting a warehouse/distribution facility a more feasible option. Land-development opportunities are primarily concentrated in the North Pierce County cities of Sumner, Puyallup and Fife. This area in particular is primed to benefit from the Port of Tacoma’s aggressive growth strategy.


Further north, Everett offers critical access to technology companies surrounding Seattle. The skilled labor force of engineers and other technical professionals clustered around Boeing and the aerospace industry is a draw for manufacturing. In 2012, Forbes author and demographer Joel Kotkin ranked the Seattle Metropolitan Statistical Area, which also includes Bellevue and Everett, as the top manufacturing growth region primarily on the back of growth of the aerospace and technology industries. The Northend manufacturing market consists of about 20.3 million square feet, representing roughly 198 buildings, as of this past third quarter. The overall manufacturing vacancy rate was also tight at 2.81 percent.  Land-development opportunities are concentrated in Mukilteo around Paine Field and the Smokey Pointe area north of Marysville.


Reshoring that leads to increased manufacturing in the greater Seattle/Puget Sound area has the potential to shift the regional ports from a primarily import model to one with considerably expanded exports.

The Port of Seattle is one of the largest and most diverse container ports in the nation with bustling fishing, cruise and shipping industries supporting more than 21,000 jobs. As of 2012, Seattle ranked as the eighth largest port nationally with 1.86 million twenty-foot equivalent units (TEUs), the standard measuring unit for intermodal containers. Another relative strength is that the Port of Seattle is one of just four western ports that are post-Panamex ready to handle the larger ships sized to pass through the expanded Panama Canal.

Although the Port of Seattle has diverse operations, including the Sea-Tac Airport and cruise terminals, the Port of Tacoma is focused on its business as a seaport. The seaport is situated away from the urban core, which reduces traffic congestion. It enjoys enthusiastic support from the city so it doesn’t face encroachment from other commercial sectors like Seattle. It has courted businesses from Seattle aggressively, luring companies such as Grand Alliance, a shipping consortium, to move operations from Seattle to Tacoma. As a result, total container volumes were up nearly 11.9 percent for the Port of Tacoma to 1.7 million TEUs this past year compared to 2012, when it was ranked as the eleventh busiest North American port in container traffic. Like Seattle, Tacoma is a net importer port. Imports at the Port of Tacoma were valued at  $36 billion and exports totaled $10 billion in 2012.

• • •

Overall, the healthy combination of advantageous geographical location, increased port activity, expanded growth strategies, available manufacturing and distribution space, and high-quality workforce makes the greater Seattle/Puget Sound industrial market prime for reshoring potential in the industrial sector. The greatest benefits to this region will be increased tax base for local governments, additional employment opportunities, economic stability and diversification.

With those regional benefits come ample opportunities in the commercial real estate market — opportunities shrewd mortgage professionals stay on top of and capitalize into new business. Although many regions in the United States are not primed to benefit from this increasing trend toward reshoring, it pays to be aware of the Seattle/Puget Sound region as a model of its potential, and use that awareness as a competitive edge when opportunities arise. 

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