EL SEGUNDO, Calif. — The space boom has come to Earth.
That’s what real estate companies firms 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.
“There’s this massive rush for space,” said Jason Fine, a managing director with commercial real estate firm JLL.
Aerospace companies favor flex space, or low-rise office buildings that can accommodate a combination of warehouse and office facilities. Fine said 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 even be zoned before companies even inquire about availability, quickening the pace at which they can be leased.
“We’ve seen a lot of these new companies backfilling these warehouses left by the old guard,” Fine said.
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 – commercial real estate has, in some cases doubled – state schools produce an annual crop of engineers ready to work. Rental prices for residential housing have also shot up, aerospace companies may 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 it 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 El Segundo already has and wants more of. County, city and local officials on the Central Coast have hopes of building out large tracts of space on 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 big-money jobs they can bring.
According to a recent JLL report, 57% percent of 2020 NASA contracts were awarded to 10 companies, nine with presences in Los Angeles.
Fine expects the market to stay hot as companies like SpaceX continue regular small satellite launches. That program, Starlink, launches new satellites out of Cape Canaveral, Fla., on an almost monthly basis.
Space Force leaders have regularly advertised interest in faster launch capabilities, leading to ongoing investment in rocket companies.
During the great recession, industry growth slowed down. In 2017, it saw another dip when companies like Honda relocated. However, since then, the need for office space over the past four years has risen steadily.
“In aerospace the market is hot. The real estate market is El Segundo is hot, but it’s not white-hot. I’d say it’s one of the hotter markets in Los Angeles,” Fine said.