It is tempting to assume that Los Angeles's biggest contribution to the defence industry and war efforts comes from producing films that celebrate heroism in battle. However, given ongoing geopolitical instability, combat operations that are depleting critical weapons stockpiles, and continued efforts to adapt the US military to the modern demands of high-tech warfare, defence spending is rapidly increasing. Nowhere benefits more from this than Southern California, particularly the South Bay. This cluster of small cities adjoining Los Angeles, including Torrance, Hawthorne, Long Beach, and El Segundo, has transformed its port-adjacent warehouse spaces into hubs of military manufacturing activity.
“The growth curve we are currently seeing for the South Bay is unprecedented,” said Mac Burridge, Managing Director at JLL and head of the advanced manufacturing team. He compared the situation to the Inland Empire during COVID, where there was a “frenzy” for available space.
Historically, the South Bay has been a centre for aerospace technology. Many of the largest traditional defence companies, the so-called “Primes”, operate from the greater L.A. area. SpaceX, which went public earlier this year, was founded in the small city of El Segundo. This city, a hub for start-ups and innovation south of Los Angeles International Airport, is an example of high technology density. This technological activity has recently accelerated significantly, a mobilisation that is among the bright spots of the Southern Californian economy. Last year, a record-breaking $366 billion was invested in start-ups in California, driven by the AI boom. However, the boom in defence technology could be even more pronounced.
Last summer's “One Big Beautiful Bill Act” authorised an additional $153 billion in defence spending, on top of record Pentagon budgets, with a proposed $1.5 trillion for next year. National venture capital investments in US defence technology amounted to approximately $70 billion over the last four quarters, according to Pitchbook, a 63 per cent increase over the preceding four quarters. In 2025, Los Angeles County received the most direct contracts from the US Department of Defense in the USA, according to Chad Tredway, Global Head of Real Estate at J.P. Morgan Asset Management. The US government provided the greater L.A. area with a total of $8.9 billion in federal funds, catalysing historical growth for start-ups and defence contractors.
“Los Angeles has the country's most significant manufacturing base,” explained Tredway, who has long directed investments in high-performance industrial facilities. He added that the “Rust Belt” represented old manufacturing methods with many people in one factory, whereas the industry is evolving towards highly specialised, technology-driven defence companies, all of which are establishing themselves in Southern California. Start-ups specifically seek certain types of next-generation workplaces, particularly large industrial halls with sufficient floor space for heavy machinery, air conditioning, vibration-controlled floors, ample parking for large workforces, and adequate power supply.
This expansion has boosted overall warehouse leasing in the region. CBRE reported that the Los Angeles industrial market recorded net absorption of 2.8 million square feet in the second quarter of 2026, nearly triple the previous quarter. Burridge estimated that demand for advanced manufacturing space in the South Bay is four times the current supply, leading to an enormous boom and a series of large deals, with no slowdown in sight. El Segundo Mayor Chris Pimentel noted that the industry's consistent growth means a constant demand for incubation space, as new waves of start-ups form and grow with technological development.
News of funding and leases is coming quickly. Torrance-based arms manufacturer Hadrian raised $1.7 billion in a Series D funding round in early August. This summer, nuclear start-up Valar Atomics signed a 512,000 square-foot lease in Torrance, while Divergent Tech, a manufacturer of Tomahawk missile components, signed a 415,000 square-foot lease in Long Beach. Hermeus, an aerospace start-up manufacturing hypersonic jets, announced its relocation from Atlanta to El Segundo in April.
“The biggest challenge is power supply,” said Bob Dougherty, Chief Investment Officer at Luminous Capital Management, which operates an industrial park portfolio in Southern California. He emphasised that they are dealing with utilities that are heavily strained by demand from data centres and other large power consumers. Although critics often fault the Golden State for its high costs and strict regulation, start-ups see a major advantage here. As Burridge and others confirm, all these groups recognise the need to locate their businesses in Southern California – a choice determined solely by the region's unique talent pool.
