Aerospace and defense leasing in Los Angeles County has nearly quintupled its share of big-box industrial activity since 2025, and brokers say the South Bay is absorbing most of it.

Between 2015 and 2024, the sector accounted for a mere 2% of big-box leasing activity, according to a Newmark report. But that has jumped to 11% since 2025, largely in the South Bay. This surge in aerospace and defense leases is revitalizing the region’s entire industrial market.

During the second quarter, the county’s industrial vacancy rate was 5.1%, down from 6.4% the previous year, according to data from Jones Lang LaSalle Inc.

Rents, meanwhile, increased 2 cents per square foot in that time period to $1.42 a square foot, the brokerage found. Rents in prime industrial areas like the South Bay and the San Gabriel Valley were much higher at $1.60 and $1.44 a square foot, respectively. Meanwhile, nearly 17 million square feet were sold or leased during the quarter, up from 11.4 million square feet in the same time period one year prior.

Leasing activity, which is “up in a big way,” has seen gains in five of the last six quarters, said Dain Fedora, Newmark’s head of Southwest Research.

“Leasing conditions have improved substantially compared to about a year ago. As far as what is propelling this greater momentum, (it’s) aerospace and defense,” he said, adding that rents had “come back down to earth” and people are “taking advantage of opportune leasing conditions.”

The industrial market boomed amid the COVID-19 pandemic as online shopping surged.

Yet one of the main factors driving this increase in aerospace and defense leasing now is soaring military expenditures, Fedora said. Defense spending has risen 54% in the past decade, according to Newmark. And that number may rise even more if President Donald Trump’s proposed $1.5 trillion defense budget for next year passes in the U.S. Congress.

“More military spending generally means more contracts,” Fedora said.

He added that the sector is also seeing more venture capital funding.

As of mid 2026, more than $14.6 billion in venture capital investment had gone to military, national security and law enforcement categories, according to Crunchbase, which noted the total already exceeds the sector’s full-year 2025 record of $9.6 billion. Fedora said the combination of military and venture capital spending in the sector would help both big players and smaller companies keep growing.

Site: The Boeing Co.’s offices in El Segundo. (Photo c/o City of El Segundo)

Desirability of South Bay

The South Bay has been the main beneficiary of the increase in aerospace and defense industrial leases, experts say. Take aerospace and defense supplier Amca. The firm launched last year with nearly $77 million in initial funding and picked El Segundo as its headquarters.

“El Segundo is responsible for a significant portion of America’s achievements in aerospace and critical engineering. We’re inspired at Amca by the work these engineers did in the latter half of the 20th century,” Jai Malik, the firm’s co-founder and chief executive, said in an email. “Today, there’s no better place to re-engineer American industry than in the South Bay. America’s best engineering talent is here solving our nation’s hardest problems.”

In May of this year, Amca raised another $300 million in series B funding, landing the manufacturer in unicorn status with a valuation of more than $1 billion.

Mac Burridge, who leads JLL’s Advanced Manufacturing Team in the region, said the South Bay’s aerospace and defense market has grown.

“The ecosystem west of the 405 has grown substantially over the last two years alone…the majority of the leasing going on from El Segundo to Long Beach is focused on advanced manufacturing tenants,” he said. “The lion’s share of leasing for industrial west of the 405 is going to advanced manufacturing tenants.”

A prime example of this growth is Varda Space Industries, which earlier this year secured a landmark 205,000-square-foot lease brokered by CBRE Group Inc. at GPI Cos.’ industrial and office campus at 2031 E. Mariposa Ave. in El Segundo. That major transaction came on the heels of Varda’s expansion into a 50,000-square-foot space nearby at 888 Douglas St., underscoring rapid space absorption across the South Bay.

Meanwhile, JetZero Inc. secured a major 30-year footprint at Long Beach Airport in October 2025, while defense giant Anduril is planning a massive, 1-million-square-foot-plus campus just north of the airfield. The latter is slated to open in 2027. FlightWave Aerospace Systems also recently signed a more than 51,000-square-foot lease in Torrance for a creative industrial property.

Burridge added that the number of large aerospace companies either headquartered in or with a significant presence in the region is an anchor. That includes Space Exploration Technologies Corp., Raytheon, The Boeing Co. and Northrop Grumman Corp.

Former employees at SpaceX alone have founded several aerospace companies in the region, including Varda Space Industries, an El Segundo-based pharmaceutical company that manufactures drugs in space; K2 Space Corp., a Torrance-based company producing satellites; Redondo Beach-based spacecraft manufacturer Impulse Space Inc.; and Torrance-based Fortastra Corp., which was founded to develop a spacecraft that can maneuver through space.

Burridge added that the number of aerospace companies that have found success in the area already means it has a huge talent pool, which is a major reason companies want to be there.

Another factor in areas like El Segundo is the relationship with the city itself, Burridge said.

“El Segundo is considered the natural early-stage incubator, especially an area called Smoky Hollow,” he said. “The mayor and previous mayor have done an incredible job encouraging these tenants.”

El Segundo Mayor Chris Pimentel emphasized the city’s nearly century-long legacy in aerospace and defense innovation.

“We were uniquely well positioned with the resurgence of (design) tech and hard tech to be a location for it,” he said, adding that the city understands the industry, which has made it more accepting of the tenants.

In June, electronic warfare defense startup CX2 Inc. unveiled its new 25,000-square-foot facility in the city, expanding its engineering and manufacturing operations.

Office: CX2 Inc.’s headquarters in El Segundo. (Photo c/o City of El Segundo)

The Smoky Hollow area was rezoned in 2018 to attract new companies. Buildings in the area are the “perfect size R&D and … to bring your project to the market,” Burridge said.

Once it’s time for companies to scale up, Long Beach and Torrance are the “big winners” and have larger spaces available, he said. But since both are close by, they can retain talent.

“There’s a natural growth stage from these companies to the other areas in the South Bay,” he said.

Building features

The distinct features of South Bay properties are further fueling local leasing demand.

“We have an advanced prototyping and testing factory and great office space in the same building, which is hard to find outside of this area,” Amca’s Malik said. “We’ve been able to vertically integrate our operations so that engineers who work in our office space get to spend a lot of time building and testing their designs themselves.”

Pimentel said El Segundo also works to “help these founders understand the labyrinth of California regulations” like wastewater requirements.

Distribution of power is another huge factor, he added. A few years ago, he even pushed to “expand our fiber reach in the city.”

Burridge and other experts echoed that point. Power is a huge factor for companies deciding where to lease space.

“Power is one of the biggest drivers. These companies need a building that can deliver and draw a lot of power,” Burridge said. He added that tenants want spaces that “look and feel like Class A office space,” in addition to the typical industrial features.

Parking is also a huge concern, as many industrial buildings don’t come with enough spaces, which some aerospace and defense companies need, Burridge said. Spaces with parking and power are seeing huge demand, and Burridge said he’s seeing some retrofitting of older assets. Increased power can take more than a year to get delivered to a site, so landlords that preemptively add it are seeing lots of interest, he said. 

Fedora added that modern facilities with high clearance height and deep truck bays are other factors tenants look for in industrial properties.

Facility: Northrop Grumman Corp.’s site at Space Park. (Photo c/o City of El Segundo)

 

Bright future expected

The aerospace and defense sector is expected to see continued demand, driving the industrial market in the South Bay. Malik, for example, said his company already plans to expand next year.

“I would expect continued demand in the market. I would expect more and more companies to headquarter themselves in Southern California and grow their companies in Southern California,” Burridge said.

“I do not see the current market conditions slowing down anytime soon,” he added.

He does, however, expect some tenants to start looking east of the 405 because “there will be a significant price differential.”

Orange County could be a beneficiary, Burridge said.

Fedora said he does not expect to see many build-to-suit properties in the area, but he could see vacancy rates compress even more and anticipates more aerospace and defense leasing in the next few quarters.

“Big players will continue to grow,” Fedora said.  “Since (venture capital) funding is up as well, I expect more startups as well, some of which have ancillary ties to big players in the region.”