Space Startups Lease 5 Million Square Feet as Satellite Production Shifts to Mass Scale

Varda Space Industries took a former Mattel toy factory in El Segundo while Blue Origin plans a 1.3 million-square-foot Texas campus as venture funding hit $11.3 billion in the first half of the year.

By the Family Office Real Estate Daily Desk·Thursday, October 15, 2026·2 min read

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Space Startups Lease 5 Million Square Feet as Satellite Production Shifts to Mass Scale — Image: editorial illustration · Story sourced from Bisnow

Space companies raised $11.3 billion in venture capital in the first half of the year and are taking industrial real estate at a pace unseen in the sector, according to JLL. Varda Space Industries in March leased a 205,000-square-foot former Mattel factory in El Segundo, California, to manufacture spacecraft. Blue Origin this month announced a 1.3 million-square-foot, $550 million satellite manufacturing campus in Hutto, Texas, promising 2,000 jobs.

The shift from technical novelty to capital-intensive mass production is driving demand for large-format manufacturing space, said Mac Burridge, a JLL managing director. Real estate has become a catalyst to company success in an industry where 78% of the global space economy is private, according to the Space Foundation. Private venture capital investment in space companies globally is expected to reach a record $100 billion this year.

Aerospace and defense leasing rose to 11% of greater Los Angeles industrial volume in the second quarter from a 2% average between 2015 and 2024, according to Newmark. Roughly a third of industrial leasing volume in greater Los Angeles went to the South Bay in the third quarter, CBRE reported. The submarket posted 2.5 million square feet of positive net absorption so far in 2026, accounting for roughly half of the total across the region.

Burridge is tracking 5 million square feet of advanced manufacturing demand in the South Bay, a significant escalation over the last 12 months. Some tenants are signing leases 12 months out because of wait times. Most companies seek higher-than-average power capacity for manufacturing, and new spaces in the South Bay can take up to 24 months to get sufficient hookups, according to Martin Pupil, partner and executive managing director at Stream Realty Partners.

No existing buildings remain that can accommodate the firms, Pupil said. The former toy factory is Varda's second location in El Segundo, part of Los Angeles's South Bay, where longstanding aerospace companies provided the foundation for one of the country's hot spots for space startups. The seaside town was the original home of SpaceX. Varda makes automated labs and satellite platforms that are launched into orbit and grow molecular crystals for use in pharmaceuticals, according to the Los Angeles Times.

Other long-term space centers like Texas and Florida's Space Coast are seeing a surge of new projects. In Brevard County, Florida, Hines broke ground on the second phase of the Space Coast Innovation Hub, which will bring 1.1 million square feet of manufacturing and logistics space to a 100-acre site near Cape Canaveral. The third phase will focus on industrial manufacturing, similar to several other projects expected to break ground soon in the area, according to Mike Moss Sr., principal and director of the industrial team at Lightle Beckner Robison.

Those include the NASA Causeway Logistics Center, a 307,000-square-foot industrial project, Amazon's 24-acre Project Satellite facility in Titusville, Florida, and an 830,000-square-foot manufacturing facility for Blue Origin. The U.S. Department of Transportation projects there will be 10,000 annual launches and reentries in the U.S. by 2035, compared to 250 in 2025. The One Big Beautiful Bill Act allowed for additional municipal bond funding for spaceports, and a proposed House bill includes $400 million for NASA's commercial low Earth orbit destinations program.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

Co-investment alongside aerospace landlords favors build-to-suit joint ventures with credit tenants over speculative development. Blue Origin's $550 million Hutto campus and the Space Coast Innovation Hub carry long-term government contracts and established operating histories, reducing lease-up risk. Family offices with construction expertise can participate as capital partners to developers like Hines or Stream, taking a 20% to 40% equity position and capturing both development fees and stabilized yield.

Direct ownership requires underwriting 24-month power delivery timelines and pre-leasing risk. A 200,000-square-foot South Bay manufacturing shell costs roughly $80 million to $100 million to develop at current construction rates, assuming 400 watts per square foot and $150 to $200 per square foot in hard costs plus utility infrastructure. Tenant improvement allowances for aerospace users run $50 to $80 per square foot. The arithmetic points to a total basis near $250 per square foot before land, which in El Segundo trades at $80 to $120 per square foot for entitled parcels.

Platform capital works best when deployed into operating portfolios with diversified tenant rosters. A pure-play aerospace exposure in the South Bay or Brevard County carries concentration risk if launch activity stalls or if a single tenant represents more than 30% of net operating income. Pairs well with defense contractors or data-center users who also require high power loads and can absorb similar infrastructure costs. Avoid speculative land banking in tertiary spaceport markets without anchor tenants already committed.

The 5 million square feet of tracked South Bay demand suggests stabilized cap rates will compress further as institutional capital follows venture dollars into the sector. Family offices entering now should price in 12-month pre-leasing windows and negotiate tenant improvement caps tied to actual power delivery, not projected timelines. Structures that shift utility hookup risk to the sponsor or include lease commencement tied to certificate of occupancy plus energized transformers reduce downside.

Original reporting

Bisnow

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