SAN BERNARDINO, CA-It has been said that the US has added more net manufacturing jobs, since the start of 2010 than the rest of the G7 nations put together, with only two other economies—Germany and Canada—increasing factory employment at all. Reports further note that the jump is due to a number of factors, including American productivity growth, compressed wages, and higher energy costs. Can we expect a manufacturing resurgence in America? GlobeSt.com recently caught up with Mary Jane Olhasso, economic development director for San Bernardino County, about the importance of manufacturing in job creation and business attraction today and how the County is getting involved.
GlobeSt.com: For the longest time it seemed that outsourcing was the trend in business with China gaining jobs at the expense of the US. What is changing that trend?
Olhasso: In August 2011, Boston Consulting Group published Made In America Again. In the report, BCG noted that China’s overwhelming manufacturing cost advantage over the US is shrinking fast. Within five years BCG analysis concludes, rising Chinese wages, higher US productivity, a weaker dollar, and other factors will virtually close the cost gap between the US and China for many goods consumed in North America. BCG’s report further asserts that for many products sold in North America, the US will become a more attractive manufacturing option.
GlobeSt.com: How does that benefit the Inland Empire?
Olhasso: We are one of the nation’s top industrial regions for many reasons, including labor, location, access to the Pacific Rim and the Ports, and lower land and real estate costs. What is interesting to note now is that one of the points made by BCG in their report is that companies should weigh the many advantages of locating manufacturing close to consumers, such as the ability to more quickly get products into the hands of customers, replace depleted inventory of popular items and make design changes in response to market trends and consumer demands.
GlobeSt.com: What would you say is the reason so many retailers locate their facilities to the area?
Olhasso: A significant benefit to our region on a national level is our access to a 23 million strong Southern California consumer population. It is the reason so many retailers locate their distribution operations to the Inland Empire. They can compress their delivery cycles. Firms such as United Furniture and Ashley Furniture have located and expanded in the County to get closer to vendors, suppliers and their consumers.
GlobeSt.com: How does 2012 shape up from a competitive perspective?
Olhasso: In 2011, the County added close to 2,500 jobs to its local economy, including significant activity from manufacturers. Some of the top industries relocating and expanding locally include plastics, food processing, technology, furniture manufacturing and more. That’s good news for our County and the region. Along with our location advantages, businesses cite two additional strengths that will continue to drive activity. These are affordability and labor.
GlobeSt.com: Tell me more about those two strengths specific to the County.
Olhasso: Affordability continues to be an advantage to locating and expanding in the County. CBRE notes that industrial lease rates in the County are lower than coastal Southern California counties. For example, average lease rates for Los Angeles County are $0.55 NNN per square foot per month as compared to the Inland Empire’s $0.34 NNN per square foot per month (at end of 2011). The County’s industrial building stock is also newer on average, by almost three decades. Most industrial buildings in Los Angeles were built in 1969, as compared to the average age of buildings built in the Inland Empire. The newer building stock provides flexible and highly-efficient state-of-the-art options for manufacturers.
Labor is also a big driver. I’m encouraged by the ingenuity and collaboration of our educational institutions and Workforce Investment Board in helping our existing and new manufacturers in ensuring they have the right skills to stay competitive. For example, the WIB has been an instrumental partner in helping local manufacturers such as California Steel Industries Inc. successfully graduate 34 electricians and 17 mechanics from its craft development program. The in-house program provides on-the-job training and mentoring for employees to become “A” level electricians, mechanics or machinists. Currently, CSI has 43 employees in their training programs who attend classes tailored specifically to their respective trades at Chaffey College and San Bernardino Valley College. Employees from member businesses of the Manufacturers Council of the Inland Empire also attend classes.
Brett Guge, EVP of finance and administration at California Steel Industries, reported that the program began 13 years ago and it’s been very successful in developing high quality technicians who have become fully qualified craft workers at CSI. Chaffey College and San Bernardino Valley College also have a number of programs with our local manufacturers to improve and enhance their skills. They work with industries as diverse as food and plastics manufacturing.
GlobeSt.com: The California Supreme Court recently sided with Governor Brown to end redevelopment agencies in California. What impact does this have on your work at the County?
Olhasso: Simply put, we lost an important tool in our arsenal to help developers, investors and tenants. Looking ahead we must all work together and get creative. There is still much we can do and that is why I tell brokers, developers and tenants to reach out to our agency if they are considering the County. We still have a number of key programs such as our Enterprise Zones and workforce training that can provide a real advantage.
California remains a great place to do business. I’m encouraged by early economic forecasts. Moreover the Inland Empire continues to lead the nation in industrial leasing and investment activity. Collaboration between the public and private sector will be important to our continued recovery and growth.
On Wednesday, February 29 our County will hold its Annual State of the County event inside the Million Air facilities at San Bernardino International Airport. During that event, we will share more on how the County is facilitating the implementation of the County-wide Vision and the public-private collaboration taking place to maximize our region’s resources, plus there will be a lot of valuable business networking.