Land, Tax Incentives Driving A Factory Development Boom In The Southwest

America's Southwest is experiencing a development boom in the industrial sector, but for once, it isn't just for warehouses and distribution.

In Arizona, New Mexico, Nevada and Texas, high-tech factories are popping up at a rate never seen in the region, The Wall Street Journal reports. Producers like Tesla and Intel are spending billions of dollars to expand or launch new factories, with the latter pledging $20B to expand in Arizona and $3.5B to do so in New Mexico earlier this year.

The growth in manufacturing is especially stark considering the decline in the sector that defined the last 50 years for cities like Detroit, Philadelphia, Cleveland and dozens of smaller towns in between. The four states in the Southwest mentioned above plus Oklahoma accounted for 30% of manufacturing job growth between 2017 and 2020, according to data from the U.S. Bureau of Labor Statistics reported by the WSJ.

Plentiful land, towns eager to lure the quality jobs that modern factories bring and a persistent disruption in the global supply chain have combined to drive the boom, CBRE Executive Vice President Eric Stavriotis, who leads the brokerage's location incentives group, told the WSJ. Steel producer Steel Dynamics is opening what will become the Southwest's largest steel mill in Texas later this year, citing its proximity to new factories as a competitive advantage.

Electric car startup Lucid Motors is readying what will be Arizona's first automobile assembly plant for an opening this year, the WSJ reports, spending $700M to build a factory exceeding 1M SF. The largest capital commitment to be announced in 2020 came in the form of a $12B microchip factory to be built near Phoenix by Taiwan Semiconductor Manufacturing Co., the largest chip producer in the world, the WSJ reports.

Lucid and TSMC received tax incentive packages to select Arizona sites for their plants, the details of which have not been disclosed. Tesla's battery and parts assembly plant under construction in Texas will have the benefit of the state's lack of income tax, an enticement that has drawn workers at rates outpacing the rest of the country for years.