In the October newsletter, I will provide an update on the current state of the manufacturing space. At Flex Real Estate, we have a unique perspective as both an industrial landlord and a direct stakeholder in our manufacturing companies, including Flex Machine Tools and Air-tow Trailers. We are on the front lines in the space every day, working with tenants, customers, and suppliers. There are key elements affecting the industry, including tariffs, automation, and the workforce, that will determine the future of manufacturing in the US.
Tariffs
One of the primary objectives of the Trump administration since taking office has been to utilize tariffs to attract manufacturing back to the United States from locations offering cheaper labor and supplies, such as Southeast Asia and Central and South America. This, in theory, will protect industries such as the automotive industry, particularly for companies that manufacture and sell in the country. The concern is that we will need to revamp the number of tier one and two suppliers to the industry, which have seen the most competition from outsourcing due to the low skill / lessened certification requirements needed to enter the space. Sourcing parts for more advanced or final goods manufacturing is challenging in the short term because the entire system has been organized around outsourcing these items to the most cost-effective location. These tier one and two providers, with the aid of tariffs, will need to make significant investments in machinery and automation, even to initiate a domestic industry reboot. At the finished goods level, General Motors, for example, expects a $4 billion hit to its profit due to the tariff impact. However, General Motors is exploring manufacturing more domestically to offset these costs, which would be the overall intended effect of the tariffs.
Automation
Flex Machine Tools is having a great year, selling large-ticket cutting machines ranging from $200,000 to $1,000,000. A significant part of this is about onshoring and the return to manufacturing in the US, combined with an interest in automation and reducing the number of employees required to complete the same job. U.S. companies are committing to automation with over $1 billion worth of robots ordered in the first half of 2025. Anecdotally, within Flex’s network, we have observed robotics companies experiencing increased investment from equity markets, as well as higher sales. This efficiency can then be used to deploy workers to areas that are more necessary or create more skilled positions. The biggest hurdle for manufacturers to overcome in the automation space will be the time and monetary investment into robotics/ automation. Processes don’t transform overnight, and redeploying an employee to create a process that is away from revenue-generating activities is difficult; even hiring outside consulting will come with a cost and require employee time. I foresee the significant boost to automation in 2026 being driven by a reduction in borrowing costs with Federal Reserve rate cuts continuing. The availability and overall cost of credit should continue to drive this ongoing transformation.
Hiring
As of August 2025, the United States has 12.7 million people employed in the manufacturing sector, and the sector has lost 89,000 jobs since the previous year. While this is not a positive, it is more than likely the short-term pain of reorganizing the labor we incentivize in the United States. There are nearly 400,000 job openings currently, and a potential reason for this hiring gap is a lack of skilled workers and targeted education focused on manufacturing. The current administration is addressing this issue through two notable programs: registered apprenticeships, with a goal of one million active apprenticeships, and reorganizing the secondary education program to transition from a college-for-all approach to a career and technical-focused education, beginning as early as fifth grade. These programs, in theory, reorganize labor training to increase the number of younger Americans entering the manufacturing space. It will be most effective if there is also private market investment into similar programs in tandem with the government.
United States Manufacturing Jobs - Trailing 12 Months
The Future of US Manufacturing
Manufacturing in the US is likely to continue improving under current conditions, driven by automation, incentivization, and consequences that manufacturers are experiencing. However, there will be short-term growing pains as the supply chain and workforce reorganize. The ability of companies to add automation and invest in their manufacturing spaces is likely to be boosted by access to capital and the easing of capital costs in the United States as the Fed continues its rate-cutting path. The two ingredients to success in this reorganization are time and commitment to the plan, because attempting to overhaul the direction of US manufacturing is not an issue solved by one administration and will likely take a decade or more of effort.
The Effect on Industrial Real Estate
As manufacturing continues to grow in the US, the industrial real estate market will see increased demand, driving new development. Major build-to-suit projects are already underway in secondary and tertiary markets, driving growth in the areas that surround them. This resurgence of manufacturing will drive down industrial vacancy rates and provide prime investment opportunities, which Flex Real Estate will look to capitalize on. We aim to continue to provide tenants with great spaces for their businesses while understanding their needs, and will continue to invest in quality warehouses, because, in the long term, we believe in manufacturing here in the United States.
Reply to this email and let me know if there are any specific topics you would like to hear about next. Thank you for reading, and stay tuned for the November Focus!
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