US REITs Are in Play as China's Role as the World's Factory Wanes

Jon Markman

Chin’s reign as the world’s factory is over, according to a key manager of the company that makes iPhones there. It’s a transformative shift that traders should get ahead of.

Young Liu, chairman of Foxconn Technology Group, told Bloomberg that plans are ongoing to gradually move its factories out of China as trade tensions worsen with the United States.

It’s the first concrete sign the world is being split into two silos.

Foxconn, the largest consumer electronics contract manufacturer in the world, operates factories in 12 Chinese cities, putting together Apple ((AAPL) -Get Report) iPhones, Dell ((DELL) -Get Report) laptops and Nintendo Switch gaming consoles, among other high profile products.

The company is caught in the middle of an escalating trade war, and Young Lui is looking for a way out. Bloomberg notes that the company is opening manufacturing locations in India, Southeast Asia and the Americas, where goods can be manufactured without fear of tariffs.

Investors should be paying attention. The global supply chain is being remade before our eyes, with huge implications. Operationally, it will mean higher costs for products and reduced profit margins. But it will also lead to new opportunities.

Many goods, especially products needed for national security, are going to be made locally. The COVID-19 pandemic highlighted the folly of relying too much on global supply chains.

The Foxconn news reveals other supply chains are moving, too.

The best way to play this trend might not be obvious. Investors should look to pure-play industrial property real estate investment trusts, like Duke Realty ((DRE) -Get Report) and ProLogis Inc. ((PLD) -Get Report). These technology forward firms, offer attractive leaseholds to industrial and logistics tenants. They also pay attractive yields.

They are primed to be the beneficiary of the retooling of American cities and factories.