EV Battery Quest Super-Charges Demand for Sites, Facilities
Upward of $80 billion worth of projects have been announced. Here’s what that means for CRE.
Spurred on by tax credits, U.S. automakers are investing a lot of capital into finding the best electric vehicle batteries, thereby pumping up their real estate requirements in the process.
Several innovative EV batteries under development would make EV batteries safer, improve performance, and lower the cost, ultimately making EVs more acceptable to consumers, noted Seth Martindale, CBRE senior managing director, Americas Consulting/Location Incentives, which assists manufacturers with site selection.
“Since it is unclear which battery will provide the right mix of benefits and prevail, auto manufacturers are investing in multiple battery developers simultaneously,” Martindale said.
Seventy-seven EV battery projects have been announced nationally since the signing of the Inflation Reduction Act in August of 2022, according to a Cushman & Wakefield report. These projects total more than $80 billion in investment capital and a projected 49,000 new, good-paying jobs.
“Given the critical nature of battery performance and safety, dedicated facilities for battery recycling, quality control and testing will be essential,” said Patrich Jett, senior vice president in Colliers’ Detroit office & chair of the Automotive Practice Group.
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Next-generation battery technology—the industry is targeting a solid-state battery for EVs—was not expected to be ready for production until the end of this decade, but the Jobs Act, CHIPS and Science Act, and the IRA are supercharging domestic manufacturing, especially EV projects and the parts that go into them, including batteries, chips and semiconductors.
The industry’s most immediate hope, sold-state batteries would have longer lifespans than lithium-ion batteries and higher energy density, which would provide driving ranges of up to 700 miles (1000 km) on a single charge, while reducing charging to 80 percent capacity to under 15 minutes. Solid-state batteries use solid electrodes and electrolytes.
“U.S. chip and semiconductor manufacturing are indispensable to EV battery manufacturing, playing crucial roles in battery management systems, power electronics, autonomous driving, connectivity, supply-chain resilience and economic growth,” explained Jett.
What it means for CRE
Capital investment in the EV industry will have a huge impact on local economies and commercial real estate.
“I think there’s a lot of opportunity for the real estate community to bring master-planned industrial sites to the market that are as close to shovel-ready as possible to offer a path of least resistance to get to construction,” noted Matt Jackson, JLL executive vice president for brokerage. “Below that, you have the tier-one and tier-two suppliers, which don’t need mega-sites, but they still need good sites ideally close to these OEMs, or in the region that’s close to them.”
Pad-ready sites with adequate utilities and transportation infrastructure, Martindale noted, are now skyrocketing in price.
EV mega-sites located on green fields in remote areas will attract thousands of workers, Martindale added. And workers and their families will need housing and nearby retail and other services, which will provide opportunities for developers of residential, multifamily, retail, and services like health-care facilities.
Trend toward consolidation
The broad trend in the EV industry is to consolidate production activities within dedicated manufacturing hubs. A report from Newmark noted that auto manufacturers are locating EV production facilities near existing auto plants and converting combustion-engine plants to EV manufacturing to take advantage of existing supply chains and skilled labor. To maximize efficiencies, EV battery manufacturers are aligning their facilities in proximity to the EV plants they supply with batteries. LG Energy Solutions, for example, located its $4.4 billion battery factory in Toledo, Ohio, near the Honda plant.
“By co-location of battery, EV and supplier facilities, companies aim to optimize efficiency, enhance collaboration, and accelerate the transition to electric,” Jett said. “As the demand for electric vehicles grows, we can expect further investment in integrated manufacturing nationwide.”
Ford Motor Co. is under construction on a $5.2 billion EV plant on a mega-site, which is expected to produce about 500,000 vehicles annually, at BlueOval City near Stanton, Tenn. The site, which comprises nearly 6 square miles, provides space for various EV materials and component suppliers or parts assembly facilities, as well as for creating a transportation hub and warehousing facilities.
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Ford has partnered with Korea battery manufacturer SK Innovation, which is building a 4.2 million-square-foot production facility adjacent to the EV plant. The investment for these two main manufacturing facilities, which will occupy 3,600 acres, totals $11.4 billion and is expected to create about 11,000 new jobs.
Site selection challenges
But these developments are not the slam-dunk for commercial real estate that one would expect. “These mega-sites, which require upward of 500 to 1,000 acres or more, are very difficult to assemble,” said Jackson.
Further, sites large enough to accommodate an EV manufacturing ecosystem tend to be in remote locations without the necessary utilities, transportation infrastructure, or available labor capacity required for this type of manufacturing, he added.
“In a world where we’re running out of good sites, manufacturers will look at greenfield options, and green fields take a long time (to assemble and develop),” Jackson said.
He explained that despite automation, this type of manufacturing is labor-intensive and requires proximity to rail and highway interchanges, high-capacity electricity, gas, large amounts of clean water, wastewater recycling and ultra-high-speed telecommunications connections.
Ideally, the site also has a flat terrain with good soil, no environmental problems, no ecological challenges (protected species or protected habitats), or no archaeological challenges (cemeteries or historical sites of significance), and is close to a labor force, Jackson added.
These projects also have complicated permitting because EV batteries involve highly flammable materials, said Christa DiLalo, Cushman & Wakefield director of research for the Southeast, noting that ensuring regulatory compliance also can be difficult and costly, especially when raw materials are involved.
Further, due to current labor constraints, DiLalo also noted, manufacturers must offer high wages to attract skilled talent. And due to these facilities’ reliance on advanced technology and specialized equipment, construction is extremely capital intensive at a time when interest rates are high and lenders are hesitant, she continued.
According to the Cushman & Wakefield report, nearly half (49.4 percent) of battery projects under construction or planned are in the Southeast, which has earned the region the moniker The Battery Belt.
That’s not surprising since, as DiLalo points out, “The Southeast has attracted auto manufacturers for decades because of its business-friendly environments and right-to-work laws.”
Another advantage, she notes, is the region’s seaports, particularly the Port of Savannah, which is complemented by a growing inland port network and transportation infrastructure throughout the Southeast that facilitates the transport of materials and supplies not available locally.
Hyundai, for example, is under construction on a $5.5 billion, 12 million-square-foot EV mega-site in Savannah that is scheduled for completion in early 2025. This site will total 17 million-square-feet when an LG battery component and other future phases are completed. This project is projected to create nearly 8,500 jobs.
Meanwhile, manufacturers that produce auto parts and polyhydroxyalkanoates, a potential replacement for some petrochemical-based plastic, are establishing production facilities near the Hyundai mega-site, representing another 2.6 million-square-feet of new build-to-suit space.
Land grabs and leases
Landholders with undeveloped or underutilized land parcels have an opportunity to participate in greenfield developments focused on EV and battery manufacturing, Jett noted.
By investing in infrastructure development, such as roads, utilities and renewable energy installations, landholders can enhance the attractiveness of their properties for industrial development, he said. Investors interested in sustainable real estate projects can also partner with landholders to fund sustainable infrastructure projects, like renewable energy, and capitalize on the long-term growth potential of the EV industry.
The expansion of EV manufacturing and solid-state battery projects and related supply chains are driving demand for industrial real estate sites, Jett continued, noting that real estate developers and investors can capitalize on this opportunity by developing or repurposing industrial properties to meet the needs of EV manufacturers and suppliers, specifically in EV-centric regions.
“Providing specialized infrastructure and amenities conducive to innovation can attract leading battery manufacturers, technology startups, and academic institutions to establish R&D hubs, driving knowledge creation and industry advancement,” Jett added.
Additionally, Greg Matter, JLL executive managing director and leader of JLL’s Advanced Manufacturing team, said that that manufacturers are increasingly leasing their facilities, providing opportunities for speculative industrial development as well.
“The tailwinds of the EV industry—and clean-tech in general—are an enormous opportunity for the industrial real estate sector that will largely benefit the Southeast and Midwest regions,” said Sean Devaney, senior managing director, JLL Capital Markets. “As capital continues to be invested in this space for production plants, there will be significant warehouse demand for suppliers and vendors to support this industry.”
His team has already completed several EV-related transactions and is working on several warehousing assignments to service this industry, including Gateway Commerce Center, a new, 434,000-square-foot, Class A warehouse in the Cleveland metropolitan area that will service the Ultium manufacturing plant in Lordstown, which produces battery cells for GM’s EVs.
“Industrial real estate developers can leverage their land holdings to develop strategically located logistics parks or fulfillment centers with modern amenities, efficient transportation access, and sustainable features that meet the evolving needs of EV manufacturers and suppliers,” he added.
As the de-risking of supply chains accelerates, re-shoring/nearshoring and the fight against climate change accelerates, it is estimated that $4 trillion to $7 trillion of capital will be needed in the domestic EV sector by 2040.
Car makers, battery companies and other suppliers will need real estate to get where they are going.
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