The race for dominance in artificial intelligence and advanced manufacturing is at a critical juncture in the US. The key hurdle in this quest is the scarcity of development-ready industrial sites. A survey by the Site Selector’s Guild revealed that nearly two-thirds of those involved in securing US industrial sites identified this scarcity as the primary factor impeding new projects. Additionally, 87% of respondents cited resource shortages, including land, labor, and utilities, as factors that have affected or compromised project timelines. The landscape of industrial development in the US is undergoing significant changes, driven by President Joe Biden’s groundbreaking industrial policies – the Inflation Reduction Act and the Chips and Science Act. These policies have sparked a manufacturing boom, with nearly $400 billion in large-scale investment announcements since their inception in August 2022. At the same time, the ascendancy of AI has fueled a surge in data center construction. Project announcements in this sector have tripled in the first half of 2024, according to data provider Wood Mackenzie. However, the rapid growth in these industries has ignited fierce competition for suitable land, potentially derailing the White House’s efforts to onshore manufacturing and shift supply chains away from China.
Challenges Faced in Securing Industrial Sites:
- The constraint is not merely space but finding land with easy access to the power grid.
- The growth of manufacturing and data centers is generating a significant increase in electricity demand across an aging grid, with new power station projects facing lengthy wait times.
- Estimates indicate a steep rise in US power demand, necessitating a surge in electricity generation to meet projected needs.
- Data centers, in particular, are energy-intensive, requiring a considerable power supply.
- State and local officials are engaged in a debate over the economic benefits of attracting data center developers versus advanced manufacturers.
The Quest for Suitable Industrial Sites:
Amidst the high demand for sites from data center developers and advanced manufacturers, state and local officials are deliberating on the economic viability of different industries. While factories tend to generate more jobs, they may yield lower property tax revenue and need to be located near large population centers for hiring. Consequently, there is a growing focus on job creation as a pivotal metric for economic development. North Carolina, for instance, has attracted significant manufacturing projects in recent years, depleting its inventory of large ready industrial sites. In response, the state has allocated funds to identify and prepare new industrial sites, mirroring efforts by other states such as Kentucky, Michigan, and Tennessee.
The Evolving Landscape:
As vacancy rates in primary markets dwindle, developers are exploring lower-tier locations with more readily available space and power. Subsequently, secondary markets like Austin, Minneapolis, and Charlotte have experienced decreased vacancy rates, signaling a shift towards alternative locations. However, the quest for suitable industrial sites has become increasingly challenging, requiring developers to venture beyond traditional markets in search of viable options.
In conclusion, the scarcity of development-ready industrial sites poses a significant challenge to the US’s ambitions in artificial intelligence and advanced manufacturing. As the landscape evolves and competition intensifies, the need for strategic planning and innovative solutions becomes more pronounced. Stakeholders in the industrial development sector must collaborate, adapt, and explore new avenues to overcome these hurdles and propel the nation towards leadership in these critical industries.
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