Aerospace, Defense Real Estate Tight in Southern California

A surge of aerospace and defense tenants is tightening the industrial market in Los Angeles’ historic aviation hubs, where companies hunting for specialized buildings are running into limited supply.

Aerospace and defense tenants leased more than 1.4 million square feet across 11 major South Bay deals last year, according to Colliers. Older industrial buildings tend to attract more interest, as aerospace and defense tenants search for high overhead clearance, parking and often additional security and entry controls.

Drone manufacturer FlightWave Aerospace Systems is among the firms expanding, Bisnow reported. FlightWave expanded from a 14,600-square-foot space in Carson that it leased a year ago into a 51,000-square-foot facility in Torrance, signing a five-year lease worth about $5.4 million. The company needed a building with high clear heights and more power capacity than a typical warehouse, FlightWave president Shawn Webb said.

Such requirements are increasingly common across the region, as aerospace and defense companies cluster in long-established industry areas like the South Bay and the Santa Clarita Valley, according to Bisnow. Brokers say those tenants are competing for a small pool of industrial properties that can support heavy power loads, security upgrades and specialized manufacturing equipment.

For companies with more technical requirements, new construction is still the best option, according to Bisnow. Developers are increasingly targeting areas around Long Beach Airport, once home to aerospace giants like McDonnell Douglas and Boeing, for build-to-suit campuses.

That demand is already reshaping the market. Earlier this year, Palmer Luckey’s defense startup Anduril signed a $1 billion lease for more than 1 million square feet in a new Long Beach complex developed by Sares Regis Group. The project is slated to open in phases starting next year. Buildings in that pocket of Long Beach near the airport that sat vacant for years are now occupied as demand heats up.

“Last year there were between 10 and 15 available buildings,” Sinasohn said. “Now there are zero.”

Venture capital and government contracts are helping to fuel the expansion.

Aerospace and defense companies captured 34 percent of the $12 billion in venture capital invested in Los Angeles-based companies last year, according to Colliers. Meanwhile, the federal government’s defense budget supports new programs and contractors, creating a steady pipeline of industrial leases. Last month, Congress approved a defense appropriations bill totaling $838.7 billion in discretionary funding.

— Chris Malone Méndez