Is Onshoring the Answer to Supply Chain Disruptions?
The Benefits of SoCal Onshoring
As businesses globally reassess their strategies in light of a shifting political landscape and evolving trade policies, Southern California has become a critical hub for onshoring production and optimizing supply chains. With its strategic logistics infrastructure, skilled workforce, and competitive economic advantages, SoCal is a prime market for localized manufacturing. This shift is reshaping the real estate landscape, offering new opportunities for both investors and businesses seeking to future-proof their operations in both industrial and commercial real estate (CRE).
What Are the Benefits of Onshoring?
Onshoring, the practice of relocating production back to domestic markets, has gained significant traction due to several important factors driving this shift.
Supply Chain Resilience: Global supply chains were exposed to vulnerabilities during the pandemic and subsequent geopolitical tensions, prompting businesses to nearshore operations to mitigate risks associated with long-distance dependencies.
Cost Control: Rising labor costs in traditional offshore markets (e.g., China) and escalating freight and logistics expenses have made local production in SoCal more economically viable for a range of industries.
Sustainability Objectives: Shorter supply chains are aligning with corporate sustainability goals, reducing carbon footprints through consolidated logistics and localized production networks.
Government Incentives: Federal and state-level tax breaks, grants, and economic development programs are driving domestic manufacturing advancements by reducing operational costs and increasing profitability for businesses choosing to reshore.
How Does Onshoring Impact SoCal Real Estate Markets?
Onshoring is reshaping Southern California’s industrial real estate markets, creating new opportunities for development. The demand for localized production and the growth of e-commerce have fueled a surge in industrial properties like distribution centers, manufacturing facilities, and logistics hubs. High-demand areas such as the Inland Empire and South Bay are seeing rising lease rates and new construction projects.
Municipalities are rezoning properties near transportation hubs and logistics infrastructure to accommodate this growth. Meanwhile, emerging submarkets like Pomona, Victorville, and the Antelope Valley are gaining traction, thanks to their proximity to major highways and rail networks.
Southern California’s evolving industrial real estate landscape highlights its critical role in modern supply chains and positions the region as a key hub for production and logistics.
What Grants and Tax Incentives Are Available for Onshoring in Southern California?
Southern California offers a range of grants and tax breaks to encourage onshoring, making it an increasingly attractive option for businesses. Here are some of the key programs:
California Competes Tax Credit (CCTC): This program provides substantial income tax credits to businesses relocating or expanding in California. Companies that meet performance metrics, like job creation and capital investment, can reduce operational costs and benefit from long-term economic growth.
California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA): This initiative offers sales and use tax exclusions to manufacturers in the alternative energy and advanced transportation sectors. It supports sustainable manufacturing, promoting high-paying, permanent jobs.
These incentives, among others, enhance Southern California’s attractiveness as a strategic hub for industrial real estate and investment.
Policies in Southern California That Encourage Onshoring
Several policies further boost the appeal of onshoring in Southern California, especially in terms of job creation and infrastructure development:
New Employment Credit (NEC): This state program offers income tax reductions for businesses creating jobs in designated Opportunity Zones. It incentivizes local hiring and promotes growth in areas primed for industrial expansion.
Port Infrastructure Development Program (PIDP): This federal initiative improves port facilities at the Ports of Los Angeles and Long Beach, streamlining logistics and increasing demand for nearby industrial properties.
U.S. CHIPS and Science Act: This federal program supports domestic manufacturing by offering funding for sectors like nanotechnology, clean energy, and AI, helping advance industries in Southern California and ensuring its position in the global supply chain.
These policies lower barriers to entry for businesses seeking to reshore, positioning Southern California as a prime location for industrial real estate investment.
What Makes SoCal An Optimal Market for Onshoring?
Southern California offers several distinctive advantages that make it a top choice for businesses pursuing onshoring. These benefits are underscored by the region’s unmatched infrastructure and connectivity.
One of the most significant advantages is its proximity to the Ports of Los Angeles and Long Beach, which together form the largest intermodal logistics hub in the U.S. These ports represent a major gateway for goods entering and leaving the country, providing businesses with access to global markets while reducing the complexities and delays associated with overseas shipping.
SoCal also boasts a diverse and highly skilled workforce, with expertise in influential industries such as aerospace, clean energy, advanced manufacturing, and high-tech sectors. The region benefits from its proximity to renowned universities like the University of California, Los Angeles (UCLA), the California Institute of Technology (Caltech), and the University of Southern California (USC), all of which have world-class science and engineering programs. This availability of top-tier academic talent further enhances the region’s attractiveness to businesses looking for a qualified and specialized workforce.
Additionally, Southern California’s robust transportation infrastructure, including a vast network of highways, railroads, and air cargo facilities, facilitates efficient movement of goods across the region and beyond. Investment in freight corridors further strengthens the region's logistics capabilities, ensuring businesses can meet the demands of modern supply chains.
Expert Guidance for SoCal’s Real Estate Logistics
Partnering with industry experts like The Klabin Company can significantly elevate your decision-making process — with over 60 years of experience specializing in the Southern California industrial and commercial markets, we are dedicated to delivering unparalleled service and expertise tailored to your needs. Our deep knowledge of local market dynamics, coupled with our commitment to integrity and innovation, equips our clients with critical insights into emerging trends and opportunities. We prioritize transparency and collaboration, ensuring that your strategy aligns seamlessly with your business’s growth and operational objectives. By leveraging our extensive network and expertise, you can navigate the complexities of the market to position your business for sustained success in this dynamic and competitive environment.