1st Quarter 2017 Hotline
by Joe A. Hollingsworth, Jr.
The so-called “Trump Revolution” that has one-half of America seemingly in despair and the other half in euphoria, from our industrial perspective, is a good thing. The full control by the Republicans of the White House, Senate, and House of Representatives means there will be accountability. For the half of America in despair, this total realignment of responsibility means Republicans have to prove their despair is totally baseless. For the half that are euphoric, Republicans will be required to produce substantial results. Additionally, as many of you know and many have been nice enough to help, my son (Trey) has joined the 115th Congress from the 9th Congressional District of Indiana (so it could be that I am a little biased).
In addition to the responsibility that comes with newly elected authority, a relatively small shift in increasing industrial needs will have a profound impact on existing space and resulting rents. It has been roughly estimated that the on-shoring of jobs from foreign countries back to America (but especially the south) could accelerate as much as 30%.
The roll back of the immense EPA overreach during the last 12 years that has given us costly energy code and drainage regulations will roll back the scheduled construction cost increases (that we have been anticipating) and could save as much as 14% of new construction cost on industrial facilities. This would go a long way to close the gap between existing rent rates and new construction rent rates. It will also increase speculative building by aggressive developers.
Corporate tax changes will have profound effects going forward. The punitive taxes that corporations have had to pay on worldwide income have been causing inversion; and, when adjusted, it will immediately
keep business at home. Taxes could also be bifurcated in so much as foreign income earned by US corporations could be taxed at higher rates
than domestic earned income thus shifting more business to America. Lower domestic taxation would present more opportunity for on-shoring,
but also enabling smaller companies to grow at faster rates allowing them to keep their money rather than having it taxed away.
The repatriation of up to 3 trillion dollars of US Corporate money positioned overseas to avoid US taxation will totally change the dynamics in America. This is the fuel America needs to accelerate the growth of operating businesses domestically. While there should be several things attached to the money coming home (in order to get the lower taxation) and if the strings are properly structured, it will be forced to be used domestically and will breed capital stacks and formation for years to come.
Whether its regulation, on-shoring, tax changes, or repatriation, these changes coupled together can produce a domestic GDP that is almost hard to fathom in this eight year old “restricted economy”. Our belief is that it could be at least 5 consecutive years of 4.5% GDP growth annually. These massive structural reforms will have long lasting effects with an economic run record that could be in excess of 12 years. Euphoria?...maybe, but I don’t think so…let’s enjoy the risk and the ride!
“Our lowest freight costs nationwide are in Amherst, Virginia.”
We didn’t expect to hear that on our recent visit to Glad Manufacturing. However, unexpected bonuses are becoming the norm in this community nestled in Virginia’s Blue Ridge Mountains. Located near Lynchburg and Charlottesville at a hub of American conveying and material handling expertise, with over 45,000 university students and exceptional workforce development programs, the region rivals any for advanced manufacturing and modern logistics resources. Bucking common wisdom, Amherst’s location at a four lane divided highway puts it at the hub of a transportation network leading to several interstates, rather than being along just one.
Amherst and The Hollingsworth Companies have partnered to provide new industrial facilities at the Brockman Business and Industrial Park. Pre-permitting and an execution plan assure that industrial buildings can be ready in as little as six months, with flexible financial terms to lease or purchase. A prototypical building will feature wide column spacing, clear heights of over 30 feet, laser leveled high strength industrial floors, and energy efficient lighting systems.
Communities like Amherst are the reason that household names like J. Crew and Glad Manufacturing call the region home. And, we have a sneaking feeling that they have discovered a lot more than lower freight costs.