Aerospace Driving CRE in Southern California

The aerospace industry’s demand for commercial real estate is on the rise. In this article, we’ll take a look at how aerospace might be driving commercial real estate in Southern California.

The Aerospace Industry and Southern California

The aerospace industry has dominated Southern California’s commercial real estate industry for decades; more specifically the coastal cities of El Segundo and Long Beach.

Naturally, as the demand for satellites increases, so does the space necessary to build them.

What Type of Space is Needed?

According to Spectrum News, “aerospace companies favor flex space, or low-rise office buildings that can accommodate a combination of warehouse and office facilities.”

Today, the market is competitive for aerospace CRE, with El Segundo’s available occupancy rate sitting at 5.3%.

Keep reading for the full article on how the aerospace market could drive commercial real estate in Southern California.

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The space boom has come to Earth.

That’s what real estate companies believe as giants like Northrop Grumman, Virgin Galactic and Relativity Space have expanded their local footprints. As demands for satellites increase, so does the need for warehouses to build them.

What You Need To Know

• The aerospace industry has grown in recent years as satellite sales increase
• Internet connectivity has been a major driver with the SpaceX Starlink network
• Space launch companies, like Relativity Space, have been buying up real estate to help meet demand
• Real estate brokers see continued growth in southern California as the Space Force comes into focus and satellite demand continues

…The available occupancy is about 5.3% in the El Segundo area. That means it’s competitive, as companies look to southern California for space, a traditional stronghold for defense and rocket launch companies.

Coastal cities like El Segundo and Long Beach, which both have lengthy histories in the industry, have economic development staff and city councils that are familiar with the zoning needs of these companies.

Buildings can be zoned before companies even inquire about availability, quickening the pace at which they can be leased.

There has been an increase of companies entering the market and utilizing warehouses left by the old guard.

That includes the old C-17 plant in Long Beach, which once produced the Boeing cargo plane. That space has since been taken over by Relativity Space, one of several recent space launch entrants.

While California companies do have to contend with the rising rental prices – which have, in some cases for CRE, doubled – state schools produce an annual crop of engineers ready to work. Rental prices for residential housing have also shot up but aerospace companies likely just see it as a cost of business.

Competing states like Texas have managed to wrest some jobs from California, including some SpaceX additions, which were built in the rival state instead.

But [operating in SoCal] still has advantages.

Southern California is just a short trip to Vandenburg Space Force Base. The state has ports that can offer straightforward transport of rocket engines, but other parts of the state have visions of taking some of the high-paying jobs from El Segundo. County, city and local officials on the Central Coast have hopes of building out large tracts of space near Vandenburg. 

Whether those ambitions materialize or not, counties outside Southern California understand the value of luring new developments from companies like Northrop Grumman and the high-paying jobs they can bring.

According to a recent report, 57% percent of 2020 NASA contracts were awarded to 10 companies, nine with some sort of presence in Los Angeles. 

At Voit, we expect the market to stay competitive as companies like SpaceX continue their regular satellite launches.