Space Tech Advancement Will Float Aerospace Real Estate Market

The space tech industry is moving into aerospace real estate—and it could be good news for the asset class. Aerospace companies occupy more than 23 million square feet of space in the Los Angeles area, but the pandemic has put pressure on the market. However, recent growth in space tech could help to insulate aerospace properties, according to research from CBRE.

“Los Angeles has long been a hub for aerospace talent and has developed deep ties with federal funding in the sector since the first half of the 20th century,” Eric Willett, regional director of research and thought leadership at CBRE, tells GlobeSt.com. “Since then, the industry’s fortunes have waxed and waned with the priorities of the federal government. Today, heightened federal support for space exploration has benefited the wide range of local groups specializing in the next generation of space technology including JPL, SpaceX, Rocket Lab, and Virgin Galactic.”

Los Angeles-based space technology companies are serving major organizations, like NASA. “In a timely example of the region’s growing relevance, NASA relying on LA-based firms stands ready to next week send astronauts to space from American soil—a feat not accomplished since the Space Shuttle fleet was retired nearly a decade ago,” says Willett.

As a result, this market segment will play an integral role in floating aerospace real estate through the incoming downturn and recovery. “Like many industries, COVID-19 has introduced headwinds to the aerospace sector. In particular, the unprecedented decline in air travel has weighed on aerospace occupiers with heavy exposure to commercial airlines,” says Willett. “However, Los Angeles’s diversified aerospace industry and significant exposure to defense-related activities indicates that the region’s aerospace-related real estate is likely to experience relatively stable demand through the current crisis.”

Space tech expansion is nothing new. The industry emerged after the financial crisis, and is continuing to grow today. “Los Angeles’s space sector is notable for both its rapid growth and its resilience through the most recent downturn,” says Willett. “The region’s space-related firms expanded during the Great Financial Crisis and they have added thousands of highly-skilled employees since then.”

And, it will likely continue to grow and remain a pillar of the L.A. market well into the future. “The strong linkages between aerospace and the federal government suggest that demand from this sector will remain steady as federal priorities remain consistent,” says Willett. “In particular, the revived interest in space exploration and the military’s investment in the Space Force suggest that the tailwinds for the regional aerospace sector are here to stay.”