Reindustrialization & Amazon

This morning Amazon announced the 20 cities that had made the first cut down from the 238 submissions. Read one local newspaper story about the news. There was a lot of excitement, as you might expect, about the announcement but it’s worth remembering that there are 19 other cities still in the running, including every city handicapped to have had an advantage over Pittsburgh from the start.

The news reminded me of a comment a gas industry executive made during the research for a recent BreakingGround article. He was grousing about all the press for the Amazon HQ2 bid and scoffed at the idea of 50,000 added jobs over the next 10-15 years. By the time the natural gas and chemical industry built out, he said, there would be 100,000 new jobs added in that sector.

That executive might have been exaggerating a little but it’s becoming clearer that the industrial sector is the big reason we’re seeing tight labor conditions ahead of what will be a bigger boom in the next two or three years. With most of the research for 2017 complete, we’ve tracked $4.37 billion in commercial/non-residential contracting. Some $2.37 billion of that total was in the industrial market. While there were a few big commercial warehouses in that number, the lion’s share of the industrial starts came from manufacturing, processing and power generation. This isn’t a one-year phenomenon. The industrial total for 2016 was $1.85 billion; and in 2015, it was $770 million. Even the relatively small total in 2014 – $492 million – dwarfs the total of any other sector during those four years.

There are a number of the mega projects – like Shell or the combined-cycle power plants – that have garnered headlines and make up big chunks of the dollars spent, but there has also been a steady stream of smaller, regionally-focused projects started. Within the past couple of months, for example, Al. Neyer started a 75,000 square foot addition to Knepper Press in Clinton Commerce Park. Hallstrom Construction is working on a 180,000 square foot addition to the New Stanton warehouse for DeLallo Foods.  These are local companies making stuff and doing stuff here. These are project that add to the employment base too.

Think back to the P.R. of the gas industry when the Marcellus Shale play started ten years ago. The payoff, they said, would be in the boom in manufacturing that would follow the exploration. This reindustrialization is starting to become bricks and mortar (or concrete and steel). Along with the construction and jobs, comes a fundamental change in the way business decisions are made. Manufacturers think in terms of the return on their assets. An asset-based economy tends to be focused on long-term trends instead of the next quarter’s results. That usually leads to better decisions for the health of the regional economy. You can read an article on the subject in the Jan/Feb BreakingGround (it’s on p. 52).

What’s going on in the technology transfer for robotics, information technology, AI and big data is an incredible opportunity for transformation of Pittsburgh’s economy. There’s an equally transformative reindustrialization trend. In the race to see which sector takes the economy higher, the winner is Pittsburgh.

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