Defense Industry Brokers Gear Up For Their 'AI Moment'
Defense contractors have long served as major office and industrial users in pockets of the country. But as defense spending ratchets up with another $150B, courtesy of the One Big Beautiful Bill Act, these companies are poised to grow their physical presence.
That growth means brokers who can work in the defense and aerospace segments of the commercial real estate market are the busiest they have been in years.
“You have AI, you have robotics, it’s probably the most feverish pitch it's ever been in my 30 years of doing this,” said Cresa Vice Chairman Tom Birnbach, a defense industry expert based in Washington, D.C.
Huge legacy players have pulled back in recent years, shedding space in line with more modern office needs, and the Department of Defense has sought to cut its footprint, along with most of the federal government.
But where these stalwarts have retrenched, startups have emerged.
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A Cresa report from May indicated that while office demand from these companies remains flat, industrial and flex space demand has surged in recent quarters. Accordingly, more brokerages are entering the space or expanding the teams focused on these firms, Birnbach said.
Typically, the companies are looking for second-generation industrial space that’s been converted, with high ceilings, roll-up doors, reinforced concrete floors and newly installed HVAC. Most range from about 25K to 75K SF, because startups can build weaponry with much less space than what was needed a few decades ago due to advanced manufacturing techniques.
These are bespoke spaces requiring specialized experts to design and retrofit, according to Cresa Head of Research Craig Van Pelt.