Southern California is experiencing a significant resurgence in manufacturing, particularly in aerospace and defense, transforming the region into a key industrial tech hub. This growth is heavily concentrated in the South Bay, including cities like Torrance, Hawthorne, Long Beach, and El Segundo. This area, once known for port-adjacent warehouse spaces, is now seeing these facilities converted into hubs for military manufacturing and advanced technology. Los Angeles County alone attracted the most direct Department of Defense contracts in the U.S. in 2025, receiving $8.9 billion in federal funding, which has spurred a boom in startups and weapons companies. Chad Tredway, global head of real estate at J.P. Morgan Asset Management, notes that Los Angeles possesses the country's most significant manufacturing base, specializing in high-tech, defense-oriented industries.
The influx of capital is substantial. In the past six months, an estimated $7 billion in major aerospace and defense contracts flowed into Los Angeles County. Key awards include $1.6 billion in U.S. Space Force satellite contracts supporting Rocket Lab and Northrop Grumman, a $2.39 billion NASA agreement for Caltech's Jet Propulsion Laboratory (JPL), and over $2.14 billion in government awards to SpaceX. Beyond government contracts, venture capital is also surging; as of mid-2026, over $14.6 billion had been invested in military, national security, and law enforcement categories, surpassing the full-year 2025 record of $9.6 billion. This funding supports both established players and emerging companies, such as Torrance-based Hadrian, which raised $1.7 billion in a Series D round, and Amca, an aerospace and defense supplier that achieved unicorn status with a valuation over $1 billion after a $300 million Series B funding round.
This robust activity has ignited a boom in the industrial real estate market, especially for specialized manufacturing spaces. The demand for advanced manufacturing space in the South Bay is estimated to be four times the current supply. Aerospace and defense leasing in Los Angeles County has nearly quintupled its share of big-box industrial activity since 2025, reaching 11% compared to 2% between 2015 and 2024. This growth has resulted in a county-wide industrial vacancy rate of 5.1% in Q2 2026, down from 6.4% a year prior, with rents increasing to $1.42 per square foot. Prime industrial areas like the South Bay command even higher rents, reaching $1.60 per square foot. Major leasing deals include Valar Atomics signing a 512,000-square-foot lease in Torrance, Divergent Tech taking 415,000 square feet in Long Beach, and Varda Space Industries securing a 205,000-square-foot lease in El Segundo. Companies like Anduril are also committing to large campuses, with Anduril planning a $1 billion, six-building, nearly 1.2 million-square-foot mixed-use campus in Long Beach.
