SoCal’s “Space Beach” is ready for liftoff
Twenty miles south of LA, Long Beach positions itself as the aerospace hub of tomorrow
Amazon, UPS and FedEx were all interested.
In 2019, a former Boeing C-17 manufacturing facility in Long Beach, abandoned by the firm in 2015, was up for redevelopment. The 1.8 million-square-foot facility included large hangars fit for rockets, plane assembly and other aerospace manufacturing.
Given its proximity to Long Beach Airport and the Ports of Long Beach and Los Angeles, e-commerce giants saw it as no-brainer. But the City of Long Beach wasn’t particularly eager to have them. Instead, it pleaded with the new owner, industrial developer Goodman Group, to work with the city to keep the facility aerospace-friendly. Taking this approach, the city felt, would attract more permanent — and higher-earning — employees, boosting tax revenues. Given the city’s long aerospace pedigree, it would also keep existing engineers and manufacturing workers in the area.
The plan worked. In June, Goodman got Relativity Space — a manufacturer of 3D-printed rockets — to take 1 million square feet at the development.
“The buildings were unusual, they could be reused for a wide range of industries,” Goodman’s Lang Cottrell said. “But we understood that the city had a vision for aerospace.”
The city’s strategy at the Boeing site wasn’t a one-off. Over the last few years, Long Beach has moved to brand itself as “Space Beach” — a hub for aerospace technology, research and development. It’s brought real estate developers to the table to identify and preserve more than 60 acres of property historically used by the aerospace industry, and it’s managed to lure a number of private aerospace firms and smaller space startups.
“We made a strong effort to try and transition to this new space economy, and it’s been successful,” Robert Garcia, mayor of Long Beach, told The Real Deal.
The right stuff
Long Beach’s relationship with aerospace manufacturing dates back to World War II, when Douglas Aircraft built a facility to churn out C-47 cargo and B-17 bomber planes.
In 1940, Douglas Aircraft bought a site near what is now Long Beach Airport for about $200,000. At the height of the war, the facility employed as many as 160,000 workers and manufactured an airplane a day.
Even after World War II, Douglas Aircraft kept manufacturing planes and bombers for the U.S. to use during the Cold War. The firm became McDonnell Douglas in 1967. It expanded the site and began manufacturing C-17s — a large military transport aircraft — in the 1980s.
After the Cold War ended in 1991, production slowed as McDonnell Douglas started to lose military contracts. The company cut its workforce at the Long Beach site by about 16 percent.
Things turned around a few years later, when Boeing acquired McDonnell Douglas in 1997 and pivoted to manufacturing commercial planes in Long Beach, as well as a few C-17s.
“We have this deep, multigenerational investment in aerospace, manufacturing, engineering, marine,” said John Keisler, Long Beach’s director of economic development.
Just as Long Beach couldn’t rely on McDonnell Douglas’ military contracts forever, it realized it couldn’t rely on Boeing alone. The manufacturing giant was starting to whittle down its workforce in the city and sell off some of its property around the airport, where it no longer needed manufacturing space. Little by little, it put land up for sale, attracting local private developers.
In 2011, Sares Regis Group, a commercial development firm based in Newport Beach, started buying acres from Boeing, but not without input from the city.
At the time, the city wasn’t set on just aerospace tenants. It was working on a master plan called Douglas Park, which would be an industrial-office hybrid park fit for a number of employers — everything from medical offices to education to advanced manufacturing.
“[Sares Regis] bought the properties that would become Douglas Park knowing full well what the mix of uses would be,” Keisler said.
The redevelopment involved rezoning and decontaminating the former Boeing land, some of which was just polluted brownfield sites, Keisler said. Despite these challenges, its proximity to the ports and airport made it an attractive investment for industrial developers.
On one of the parcels of land, 4022 E. Conant Street, Sares Regis built a 144,000-square-foot building. It then sold it for almost $20 million to Vogel Properties, an industrial development and investment firm owned by William Vogel, who could not be reached for comment.
Although the city said it would look to attract a number of tenants, zoning plans dating back to 2009 show that officials were hell-bent on landing an aerospace firm.
An area containing 4022 E. Conant Street was “intended to include light industrial uses, certain aviation related uses, manufacturing, and warehouse/distribution (as an accessory use),” according to city documents. Next door, anything built would accommodate “continued aircraft manufacturing support.”
“Warehouse and distribution uses are prohibited as a principal use,” the 2009 plans stated.
In 2015, Douglas Park got its first large aerospace tenant: Richard Branson-owned Virgin Galactic, which moved into 4022 E. Conant Street. Two years later, Branson announced that Virgin Orbit, a spinoff of Virgin Galactic focused on launching satellites, would be headquartered out of the Douglas Park site.
“Virgin Orbit was the first one of the current generation of companies to move in [to Douglas Park],” said Jordan Noone, the co-founder of Relativity Space and Embedded Ventures, an aerospace-focused VC firm. “Over time, it became more and more attractive — it wasn’t just something that the Long Beach government was saying and not acting upon.”
Bye, bye Boeing
In 2013, Long Beach was in the midst of helping develop Douglas Park when it got a huge shock: The U.S. Department of Defense was canceling Boeing’s contract to build C-17s. Boeing, which had already started to sell off some of its land, was suspending operations.
When Boeing put the site up for sale, it was clear that it would be an easier sell to one particular sector.
From a landlord’s perspective, it’s “difficult to make a decision to go build a building with specifications,” Goodman’s Cottrell said, referring to the detailed specifications that aerospace firms and manufacturers need, including very high ceilings. Having these specifications in place also makes it easier for firms to move right in.
“Nobody that I know of is building manufacturing space on spec,” said Patrick Schlehuber, the head of investments at Rexford Industrial Realty, one of Southern California’s largest industrial landlords.
“The fact that this is a former C-17 factory means that the facility already has an architectural structure that we need,” said Karin Kuo, head of people at Relativity Space. “Construction will be easier than constructing an entirely new factory.”
Goodman, which paid $200 million for the development, found the space’s versatility appealing.
“The challenge is that it’s a large industry that is growing rapidly, but it’s still in its infancy,” Cottrell said. “It’s difficult to make the decision to build a building with specialized ceiling heights, wider spans and steel columns because if that industry were to falter, it could be a problem, and then you might have an obsolete building.”
The city was thrilled to have Virgin Orbit call Long Beach home. Just as it was losing Boeing, it was gaining what it hoped would become a major job provider. But it wasn’t exactly a smooth flight.
Despite its long history with the aerospace industry, Long Beach didn’t have existing permits for what Virgin Orbit needed. The structure Sares Regis built was zoned for a number of different uses, in case an advanced manufacturer wanted to move in, but the city needed to approve permits to move 3D printers, hazardous chemicals and other specifics into the warehouse.
“We had to overcome years worth of obstacles and hurdles,” Keisler said. The city needed to approve permits to move in 3D printers, hazardous chemicals and other specifics in the warehouse.
From 2017 to 2019, the city worked to approve more than 100 permits for the building — everything from installing a 10-ton crane and a 6,000-gallon liquid nitrogen tank to adding an additional break room, records show.
The city learned to move quickly. For Relativity Space, it hopes to get the company all the permits it needs in six months, less than a quarter of the time it took for Virgin Orbit.
Rocket launchers, not distributors
Virgin Orbit’s gravitational pull was significant. Other aerospace firms started to move to the area.
SpinLaunch, a satellite startup, took a 130,000-square-foot warehouse that was built by Sares Regis in 2017. Its zoning, under the same Douglas Park plan from 2009, is dedicated to aviation-related uses, light industrial, commercial and office spaces.
Last year, Rocket Lab, a satellite manufacturer that recently went public, moved into an 88,500-square-foot facility in the north of Douglas Park — another building owned by Sares Regis. Neither SpinLaunch nor Rocket Lab responded to requests for comment.
The zoning also prevents other industrial developers from moving into the city.
“To Long Beach’s credit, those e-commerce and 3PL companies [such as Amazon, UPS and FedEx] don’t really look in Douglas Park, because the uses don’t jive with how Douglas Park is zoned,” JLL broker Kamil Agha said.
“When they redeveloped, Long Beach had some prohibitions on more traditional distribution warehousing,” said Rexford’s Schlehuber. Some aerospace firms take up space at Douglas Park “because traditional warehouses aren’t able to.”
Rexford focuses on acquiring and developing traditional warehouses and logistics buildings and isn’t in the market to build manufacturing buildings, according to Schlehuber. “I need to get a return for my shareholders,” he said. “There’s more risk in [building manufacturing properties].”
Not yet escape velocity
Long Beach isn’t the only city that’s trying to style itself as an aerospace hub.
Further north, El Segundo has prided itself on being home to the more traditional aerospace firms and defense contractors, including Northrop Grumman, Boeing, Raytheon and Lockheed Martin, attracted by its proximity to the former U.S. Air Force base — now, conveniently a U.S. Space Force base, according to Mayor Drew Boyles.
“GPS was invented in El Segundo, satellites were invented in El Segundo,” Boyles said. “Space and aerospace defense has always been a critical part of our economic base.”
But El Segundo has few warehouses, making it difficult for aerospace firms to move in.
El Segundo has lost two aerospace startups in recent years — Phase Four and Morf3D — to Long Beach, Boyles said, noting that both needed more warehouse space.
“But,” he emphasized, “they grew up in El Segundo.”
In Hawthorne, just north of El Segundo, SpaceX’s headquarters are located in a 534,000-square-foot building at 1 Rocket Road.
Although the Muskian presence in Hawthorne might have attracted more aerospace activity, SpaceX quickly leased up surrounding real estate, meaning there’s really nothing left for aerospace firms to take, developers and brokers said.
As a result, aerospace firms, for now, have looked south to Long Beach. Even SpaceX has recently leased space at the Port of Long Beach to launch rockets.
For the foreseeable future, Long Beach will continue to call itself “Space Beach.”
“We’ve been talking to a variety of companies and firms that are looking to move to Long Beach because of the density that’s being created,” Garcia said. “We very deliberately focus on aerospace.