The global pandemic, geopolitical tensions, and ongoing trade disruptions have fundamentally altered how businesses think about their supply chains. After decades of prioritizing cost efficiency through offshoring and just-in-time inventory practices, companies across industries are now rapidly restructuring their supply networks with a renewed focus on resilience, reliability, and risk mitigation. At the heart of this transformation is a powerful trend toward onshoring—bringing manufacturing and critical supply chain functions back to the United States.
At Phoenix Industrial Redevelopment (PIR), we’re witnessing firsthand how this supply chain restructuring is creating extraordinary investment opportunities in industrial real estate, particularly in the small-bay, multi-tenant segment where we specialize. This shift represents more than a temporary reaction to recent disruptions; it signals a fundamental recalibration of global manufacturing and distribution networks that will reshape the industrial landscape for decades to come.
The Perfect Storm: Forces Driving Supply Chain Restructuring
Several powerful forces have converged to accelerate the onshoring movement in recent years:
Pandemic-Exposed Vulnerabilities
The COVID-19 pandemic delivered a stark wake-up call about the fragility of extended global supply chains. From PPE shortages to semiconductor disruptions that crippled automotive production, the cascading failures revealed dangerous dependencies on distant suppliers with limited redundancy. Companies that once viewed their lean, globally distributed supply chains as competitive advantages suddenly recognized them as existential risks.
Geopolitical Instability
Rising tensions between global powers, particularly between the United States and China, have introduced new uncertainty into international supply relationships. The threat of tariffs, export restrictions, and other policy interventions has made reliance on overseas suppliers increasingly unpredictable. The Russian invasion of Ukraine further underscored how quickly geopolitical events can disrupt established supply networks.
Transportation Challenges
Global shipping disruptions, port congestion, and soaring freight costs have undermined the economic calculus that drove offshoring decisions. When container shipping costs increased tenfold during the pandemic and delivery times extended from weeks to months, the apparent cost advantages of offshore production evaporated for many products. Even as shipping rates have moderated, the reliability of international logistics remains questionable.
Automation and Technology Advancements
Technological advancements, particularly in automation, robotics, and advanced manufacturing, have significantly reduced the labor component in total production costs for many goods. This shift diminishes the primary advantage of low-wage countries, making domestic production increasingly competitive from a total cost perspective.
Rising Overseas Costs
Labor costs in traditional manufacturing locations like China have risen substantially, narrowing the cost gap with U.S. production. When combined with increasing transportation expenses, quality control challenges, and intellectual property concerns, the financial advantages of offshoring have eroded significantly for many product categories.
Policy Incentives
Recent federal legislation, including the CHIPS and Science Act, the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act, has created powerful incentives for domestic manufacturing in strategic sectors. These initiatives are accelerating investment in U.S. production capabilities, particularly in semiconductors, clean energy, and advanced technologies.
The New Supply Chain Paradigm: Resilience Over Efficiency
In response to these converging pressures, companies are adopting a fundamentally different approach to supply chain management—one that prioritizes resilience and risk mitigation alongside traditional efficiency metrics. This paradigm shift is manifesting in several key strategies:
Nearshoring and Onshoring
Companies are relocating production closer to end markets, with many bringing critical manufacturing operations back to the United States or nearby countries like Mexico and Canada. This geographic reconfiguration reduces transportation times, simplifies logistics, and mitigates exposure to international disruptions.
Supplier Diversification
Rather than relying on single sources, companies are developing multiple supplier relationships across different geographies. This diversification creates redundancy against regional disruptions and reduces dependency on individual partners.
Strategic Inventory Buffers
The just-in-time inventory approach is being supplemented with strategic stockpiling of critical components and materials. This shift requires additional warehousing and distribution capacity near manufacturing facilities and major markets.
Vertical Integration
More companies are bringing previously outsourced capabilities in-house through vertical integration, allowing greater control over critical production processes and reducing external dependencies.
Regional Supply Ecosystems
Rather than globally distributed supply chains, many companies are developing regional ecosystems where suppliers, manufacturers, and distributors operate in closer geographic proximity. These clusters reduce transportation complexity and enable more responsive collaboration.
The Ripple Effect: How Onshoring Drives Demand for Industrial Space
The onshoring trend is creating cascading effects throughout the industrial real estate market, with particular impact in three critical segments:
Primary Manufacturing Facilities
The most visible aspect of onshoring involves major manufacturers establishing new production facilities in the United States. Announcements of multi-billion-dollar investments in semiconductor plants, electric vehicle factories, battery production facilities, and other advanced manufacturing operations have captured headlines and represent the first wave of the onshoring movement.
Supplier Networks
For every primary manufacturing facility, a network of 50-200 suppliers typically emerges to provide components, materials, and specialized services. These suppliers—often small to medium-sized businesses—create substantial demand for flexible industrial spaces in proximity to the major manufacturers they serve.
Distribution Infrastructure
As production shifts domestically, distribution networks must adapt accordingly. This restructuring requires new warehousing, cross-docking, and fulfillment facilities to support the movement of goods through reconfigured supply chains.
Of these three segments, we at PIR find the supplier network opportunity particularly compelling. While larger REITs and institutional investors focus on major manufacturing facilities and large-format distribution centers, the small-bay industrial properties that house critical supplier networks often remain overlooked despite their essential role in the manufacturing ecosystem.
The Small-Bay Advantage in Supply Chain Restructuring
Small-bay, multi-tenant industrial properties—typically ranging from 20,000 to 100,000 square feet with individual spaces of 1,000 to 5,000 square feet—offer unique advantages in the context of supply chain restructuring:
Flexibility for Evolving Supplier Needs
As companies reconfigure their supply networks, suppliers require flexible spaces that can be adapted to changing production requirements. Small-bay properties with modular configurations allow suppliers to right-size their operations and adjust as demand evolves.
Strategic Clustering Opportunities
Small-bay industrial parks naturally facilitate the clustering of complementary businesses, creating mini-ecosystems where suppliers can collaborate, share resources, and serve common customers. This clustering generates efficiency even while prioritizing resilience.
Rapid Deployment Capability
When companies accelerate onshoring initiatives, their suppliers need functional space quickly. Existing small-bay industrial properties can be repurposed and occupied far faster than new development projects, allowing suppliers to respond promptly to reshoring opportunities.
Scale-Appropriate Infrastructure
Many onshoring suppliers are small to mid-sized businesses that require industrial space proportionate to their operations. Small-bay properties provide appropriate scale without the overhead of larger facilities.
Risk Distribution for Property Owners
For property investors, multi-tenant configurations distribute risk across numerous tenants rather than relying on single occupiers. This diversification proves valuable during the inevitable adjustments that accompany major supply chain restructuring.
Market Signals: Evidence of the Onshoring-Driven Demand Surge
The impact of supply chain restructuring on industrial real estate is already evident in market data and our own portfolio performance:
Record Low Vacancy Rates
Industrial vacancy rates reached historic lows across most U.S. markets in 2022-2023, with small-bay spaces in manufacturing-oriented markets experiencing particularly tight conditions. In several markets where PIR operates, vacancy rates for well-located small-bay spaces fell below 2%.
Accelerating Rent Growth
Industrial rents have grown at unprecedented rates, with year-over-year increases exceeding 10% in many markets during 2021-2023. Small-bay spaces in proximity to major manufacturing operations have often seen even greater rent acceleration as suppliers compete for limited space.
Expanding Geographic Footprint
The onshoring trend is broadening the geography of industrial demand beyond traditional distribution hubs. Markets with strong manufacturing histories that had seen moderate industrial demand in recent decades—including parts of the Southeast, Midwest, and Mountain West—are experiencing surging activity.
Compressed Cap Rates
Strong fundamentals have driven industrial cap rates to historic lows, reflecting investors’ recognition of the sector’s growth potential and relative stability. While rates have adjusted somewhat with recent interest rate increases, industrial assets continue to command premium valuations compared to other commercial property types.
Shifting Tenant Profiles
Within our own portfolio, we’ve observed a notable increase in manufacturing-related tenants, particularly those providing specialized components, materials, or services to larger producers. These businesses typically sign longer leases, invest more heavily in their spaces, and demonstrate greater renewal likelihood than traditional industrial tenants.
Strategic Investment Zones: Where Onshoring Impact is Greatest
The onshoring movement is not unfolding uniformly across the country. Several regions are emerging as particular beneficiaries of supply chain restructuring, creating concentrated investment opportunities:
The Electric Vehicle Corridor
A band stretching from Michigan through Kentucky, Tennessee, and into Georgia and the Carolinas has emerged as the epicenter of electric vehicle and battery production in the United States. Major investments by Ford, GM, Hyundai, Rivian, and numerous battery manufacturers are creating massive supplier demand throughout this corridor.
The Semiconductor Triangle
Arizona, Texas, and New York form the points of an emerging semiconductor manufacturing triangle, with Intel, TSMC, Samsung, Micron, and GlobalFoundries making investments totaling over $200 billion. The supplier networks supporting these operations require millions of square feet of specialized industrial space.
The Reshoring Belt
Parts of Ohio, Pennsylvania, Indiana, and Illinois—traditional manufacturing strongholds that suffered from previous offshoring—are experiencing robust renewal as companies prioritize existing industrial infrastructure, skilled workforces, and central location for reshored operations.
Cross-Border Zones
Areas within 100 miles of the Mexican border, particularly in Texas and Arizona, are benefiting from “nearshoring” strategies where companies maintain North American production while leveraging both U.S. and Mexican operations in integrated supply networks.
Biotech Manufacturing Clusters
Regions with strong life sciences presence—including Boston, the Research Triangle, San Diego, and parts of Maryland—are seeing increased demand for biomanufacturing space as pharmaceutical and medical device companies reduce reliance on overseas production.
The PIR Approach: Strategically Capturing the Onshoring Opportunity
At Phoenix Industrial Redevelopment, we’ve refined our investment approach to capitalize on the opportunities created by supply chain restructuring:
Strategic Market Selection
We target markets experiencing significant onshoring activity, particularly those with announced major manufacturing investments that will drive supplier demand. We focus on secondary and tertiary locations within these markets where acquisition costs remain reasonable while still benefiting from the broader onshoring trend.
Supplier-Focused Property Improvements
When we acquire properties, we implement targeted improvements designed to meet the specific needs of manufacturing suppliers:
- Enhanced power infrastructure for production equipment
- Upgraded loading capabilities for material handling
- Flexible space configurations to accommodate diverse operations
Supply Chain Cluster Development
We strategically cultivate tenant mixes that create synergistic supplier clusters within our properties. By leasing to complementary businesses serving common industrial sectors, we create additional value through the ecosystem advantages these clusters provide.
Relationship-Driven Leasing
Our leasing approach emphasizes understanding each tenant’s role in emerging supply chains and tailoring space solutions accordingly. This relationship-focused strategy has helped us achieve occupancy rates exceeding 95% across our portfolio despite rapid market changes.
Value-Add Acquisition Targeting
We specifically target properties with value-add potential through repositioning for onshoring-related tenants. Properties that may underperform with traditional tenant mixes often thrive when adapted to meet the specialized needs of manufacturing suppliers.
Investment Vehicles for Onshoring Exposure
For investors seeking to participate in the onshoring opportunity without the complexities of direct property ownership, PIR offers two strategic investment programs:
The FixedFunds Program®
Our FixedFunds Program® provides accredited investors with fixed 8.0% returns through either monthly income payments or compounded growth. This program is backed by our portfolio of small-bay industrial properties positioned to benefit from the onshoring trend. The minimum investment is $50,000, with stepped-up interest rates available for larger investments:
- Tier 1 ($50,000 to $499,999): 8.00%
- Tier 2 ($500,000 to $999,999): 8.25%
- Tier 3 ($1,000,000+): 8.50%
The FixedFunds Program® offers:
- Attractive fixed returns independent of market fluctuations
- Professional portfolio management by PIR’s experienced team
- Exposure to onshoring trends without direct property responsibilities
- Choice between income-focused or growth-focused investment options
The 1031Funds Program®
For investors with existing real estate holdings seeking a tax-advantaged approach to industrial investment, our 1031Funds Program® offers Delaware Statutory Trust interests qualifying as replacement property for 1031 exchanges. This program features:
- 5.0% annual preferred return paid monthly
- 50% participation in property appreciation upon sale
- Minimum investment of $500,000
- Professional management through our affiliated Grid Property Management
- Quarterly closing schedule for reliable 1031 exchange planning
The 1031Funds Program® provides:
- Direct participation in property appreciation driven by onshoring trends
- Tax-advantaged structure preserving 1031 exchange benefits
- Passive ownership without management responsibilities
- Potential for significant upside as supply chain restructuring drives industrial values
Navigating Challenges in the Onshoring Landscape
While the onshoring trend creates compelling opportunities, successful investment requires navigating several challenges:
Selective Reshoring Reality
Not all previously offshored production will return to the United States. Companies are making nuanced decisions about which operations to reshore based on strategic importance, automation potential, and economics. Understanding these decision drivers is essential for predicting demand patterns.
Geographic Winners and Losers
The benefits of onshoring will not distribute evenly across all markets. Regions with existing industrial infrastructure, supportive business environments, and strategic locations will capture disproportionate activity. Careful market selection remains critical.
Evolving Space Requirements
Reshored manufacturing often employs different processes and technologies than the operations that were originally offshored. This evolution creates both opportunities and challenges for property owners adapting existing industrial stock to new requirements.
Timing Variations Across Industries
The pace of onshoring varies significantly across industries, influenced by factors including product complexity, capital intensity, and regulatory considerations. Understanding these timing differences helps inform market and property selection.
Economic Cycle Impacts
While the structural onshoring trend transcends typical economic cycles, recessionary periods may temporarily slow implementation of reshoring initiatives. Investment strategies must account for these potential timing variations.
At PIR, our diversified approach—targeting multiple markets, industries, and tenant sizes—helps mitigate these challenges while positioning our portfolio to capture the broader onshoring opportunity.
Conclusion: Positioning for the Onshoring Decade
The restructuring of global supply chains and the resulting onshoring movement represent a once-in-a-generation shift in industrial dynamics. This transformation will unfold over years rather than months, creating sustained demand for appropriately positioned industrial real estate.
For investors, the opportunity extends beyond simply participating in general industrial market growth. Strategic approaches focused on the specific requirements of reshoring operations—particularly the small and mid-sized suppliers that form the backbone of manufacturing ecosystems—offer potential for superior risk-adjusted returns.
Phoenix Industrial Redevelopment’s focused strategy on small-bay, multi-tenant industrial properties in markets benefiting from supply chain restructuring creates a specialized investment opportunity at the intersection of several powerful trends. Through our FixedFunds Program® and 1031Funds Program®, accredited investors can gain exposure to this transformation without the complexities of direct property ownership.
As companies continue prioritizing supply chain resilience, geographic diversification, and manufacturing control, the demand for domestic industrial space—particularly facilities suitable for the supplier networks that support major manufacturing operations—will likely remain robust for years to come. The most successful investors will be those who recognize not just the broader trend, but the specific niches where opportunity and value creation are greatest.
To learn more about how your investment portfolio can participate in the onshoring opportunity through PIR’s specialized programs, contact our investment team today.
