The aerospace and defense boom for industrial properties in the South Bay is beginning to reshape the apartment market, drawing multifamily developers and owners into a submarket that has long been steady, quiet and undersupplied but that is now outperforming the rest of Los Angeles in rent growth.

As billions in federal and private capital flow into aerospace and defense tech firms, multifamily builders are following the jobs. Developers have delivered 583 new units in the South Bay since January, roughly 50% more than this time last year, with another 2,700 units under construction and set to arrive over the next three years. 

“That's not a huge spike, but it is more units than we usually get,” Northmarq Director of Research Peter O’Neill said, adding that it’s likely enough of an increase to create noticeable competition for owners and new options for renters. 

South Bay rents are about 10% lower on average than the greater LA average, but they're also picking up a little bit faster. The South Bay market is generally very stable, with no big swings in rents or units coming online, O’Neill said. 

Historically, there has not been a lot of new product in the submarket, and that has helped keep the market relatively even-keeled, he said. Vacancy rates over the past five years have ranged from 3.6% to 4.7%, with the average vacancy rate at 4.0%, according to Northmarq data. 

Los Angeles-based developer Cityview, along with Stockbridge Capital, opened a 265-unit multifamily project called Apollo in the South Bay city of Gardena earlier this year. Apartments advertised on the property’s website show available studios starting at about $2,800 a month, one-bedrooms starting at $3,225 and two-bedrooms starting at $4,165. 

Average rent in the submarket is $2,345 per month, according to Northmarq data. 

“With the job engine being aerospace and the aerospace corridor, we really thought that a lot of the jobs that were investing into that area would spill over into the natural need for housing, and so far, we really have experienced that,” said Shane Robinson, president of Westhome Property Management, the property manager for Cityview properties.

Aerospace and defense tech companies such as Northrop Grumman and Boeing have been a part of the South Bay landscape for decades. But increased funding for the sector has fueled the growth of companies in or supporting these industries.

Aerospace and defense users accounted for just 2% of greater LA’s industrial leasing activity in spaces of 100K SF or more between 2015 and 2024, but as of the second quarter of this year, that share had risen to 11%, Bisnow previously reported. 

The renter demographic for Cityview’s Gardena property is largely people from those industries, Robinson said. The apartment complex is a block away from Space X’s Hawthorne manufacturing facility, a former Northrop Grumman site, but is also drawing from all the different defense and aerospace companies nearby, including some that have moved to the area since the project broke ground. 

“The demographic for the project has been exactly what we thought it would be,” Robinson said. 

The demand for housing in the submarket is growing, and property owners are seeing it, too. 

Owners in the South Bay are pushing rents more than owners in other parts of the city, Colliers Vice Chair Kitty Wallace said. 

Annual asking rent growth is up 1.6% in the South Bay, more than three times the countywide rate of 0.5%, while the submarket maintains a 4.2% vacancy rate compared to the countywide average of 5.5%, or a 130-basis-point difference, according to data provided by Colliers. 

Wallace pointed out that the South Bay submarket is largely made up of smaller cities, which means that many of the challenges that landlords and developers associate with building in Los Angeles, including slow approval periods or rent control, don’t apply. 

“Historically, it’s been a solid market but a slower market,” Wallace said. “There's hardly any development in South Bay, but we're starting to see that change right now.”