On July 11th, 2021 UK entrepreneur, Virgin Galactic founder, and billionaire, Sir Richard Branson successfully completed the first private space flight.
It lasted roughly an hour, reached an altitude of 53 miles, and glided safely back to earth after touching the edge of space. It was hailed as a success and has promised to usher in a new era of commercial space tourism.
But, Richard Branson's Virgin Galactic isn't the only firm seeking to offer commercial space flight.
At present, they are part of a three company race which includes Blue Origin - backed by Amazon founder Jeff Bezos, and SpaceX - backed by Tesla CEO Elon Musk.
While this so-called "Billionaire Space Race" will certainly have massive implications for the future of space travel, it also has the potential to have major real estate ramifications for the markets that house and support these new space efforts.
In this article we are going to look at three real estate markets (in no particular order) that appear to be well positioned to benefit from the influx of jobs, capital, infrastructure, and people driven by the billionaire space race.
Market #1: Florida's Space Coast - Melbourne / Merritt Island / Brevard County
Florida's space coast is no stranger to galactic endeavors. Long before Branson, Musk, and Bezos set their eyes on space, the National Aeronautical and Space Administration (NASA) decided to move their large rocket launching operation to Cape Canaveral.
After nearly 60 years, NASA ceased manned spaceflight operations in 2011, but "the Cape" is no stranger to the space industry. In fact, since NASA has scaled down their operations, there are three reasons why private space ventures have been quick to step in and fill the void:
- Institutional Knowledge: Given its history with NASA, the space coast remains home to a high concentration of aerospace engineers, manufacturing experts, pilots, and computer programmers. These skill sets are highly sought after by private space companies and they are plentiful in this part of FL.
- Infrastructure: Again, due to its history with NASA, the Space Coast already contains the physical infrastructure needed to design, build, assemble, and launch heavy rockets and spacecraft. These types of facilities are astronomically expensive so it is far cheaper for startups and private companies to utilize existing assets rather than develop new ones.
- Lifestyle: For many, living and working in coastal Florida presents an attractive opportunity from a lifestyle perspective. The weather is good, the taxes are low, and the opportunities for recreation are plentiful. If a certain role can't be filled by someone who already lives in Florida, selling someone else on the idea of moving there may be relatively easy.
For all of the reasons above, it should be no surprise that major players in the private space race have chosen the Space Coast to house major portions of their operations.
For example, Blue Origin operates a 750,000 SF rocket manufacturing facility in Merritt Island. Lockheed Martin is building its Orion spacecraft - meant for human spaceflight - at Kennedy Space Center, and Boeing has chosen to place their launch division headquarters in nearby Titusville.
In short, the area is brimming with activity. From both a commercial and residential real estate perspective, the Space Coast appears to be well positioned to benefit from the ongoing growth in economic activity, high paying jobs, and the people that follow both.
According to the Federal Housing Finance Agency's Home Price Index, prices in Brevard County, FL (home to the Space Coast) have notched a 128% increase since 2000, which includes a 6.4% increase in 2020 alone. These numbers outpace much of the country.
On the commercial side, The Milken Institute ranked the Melbourne/Titusville MSA as the second best performing city in the United States in 2021 due to its high wage and job growth. Demand for office, manufacturing, and industrial space is particularly high and is not expected to abate anytime soon given the anticipated growth of the space and defense industries in the area.
Market #2: Brownsville / Boca Chica Texas
Brownsville and Boca Chica are located on the coast near the southernmost tip of Texas. They are small towns that are in the midst of a major transformation.
Prior to the appearance of SpaceX, the major local employers were the school district and the federal government. However, on March 30th, 2021 Elon Musk sent out a tweet asking for space engineers, technicians, and support personnel to consider moving to the area to take advantage of the open jobs at the SpaceX rocket production facility. His 58 million followers responded in a big way.
According to local real estate agent Bruno Zavaleta, the housing market changed almost immediately.
Specifically, he stated that he is "...seeing multiple offers everywhere and everything going over asking price."
The data supports this claim. According to the Brownsville/South Padre Island Board of Realtors, the median price for a single family home rose 14.2% in March 20201 alone while the number of active listings were down 51.2% from the prior year. In fact, the inventory issue has been exacerbated by SpaceX efforts to buy entire villages, which is not without controversy.
By his own admission, Elon Musk has stated that he expects the area to grow by thousands of workers in the coming years.
They will all need places to live, shop, and eat.
Given the already low levels of housing inventory and expected influx of high paying jobs, the residential housing market appears to be particularly well positioned to benefit.
Market #3: Sierra County, New Mexico
Virgin Galactic has chosen to locate their manufacturing and testing facilities for suborbital space flight in Sierra County, New Mexico. It is a small area located roughly halfway between El Paso, TX and Albuquerque, NM.
Like the other locations, this small county has the potential to be completely transformed by its designation as a spaceport and the commercial space exploration activity that comes with it.
The local housing market is already showing signs of growth. According to the Federal Housing Finance Agency's Home Price Increase Map, home prices in Sierra County rose 12.2% in the last year (2020) alone.
Although Sierra County is more remote than the other two markets, the prospect of working in a commercial space program - and the wages that come with it - is likely incredibly attractive for potential employees, vendors, and contractors.
For this reason, Sierra County also appears to be well-positioned to take advantage of the interest in its commercial space program.
How to Take Advantage?
The one thing that all three of these markets have in common is the "network effect" that these commercial space efforts are creating.
The amount of money that is being spent is attracting jobs, people, and perhaps most importantly, other companies who are vendors and partners to the "big three."
In turn, these companies attract other people and vendors, which creates an entire community around space travel.
These sorts of interdependent communities are the holy grail for government leaders and economic development officials and they are incredibly difficult to replicate.
At present, it appears that the best asset class for each of these markets is residential housing which includes both single family homes and commercial multifamily properties. This is because all three of these markets are smaller in nature and tend to be supply constrained.
It is likely that the large influx of workers will outpace growth in housing supply, which should be favorable for price increases.
Other classes to consider would be the industrial and manufacturing facilities that will be needed to support the major players in each market (SpaceX, Blue Origin, and Virgin Galactic) as well as their suppliers and collaborators.
But, as always, interested investors should be careful to perform their own due diligence to ensure that their chosen opportunities are a good fit for their risk tolerance and investment objectives.
