Real-Estate Developers Chase Outer Space Business in Florida

Author: Konrad Putzier, Wall Street Journal (Exclusive)

Hines is developing a sprawling industrial park near Florida’s Cape Canaveral, aiming to cash in on the booming aerospace industry.

The giant Texas real-estate firm is betting that companies such as Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX and their suppliers will pay high rents for warehouses and manufacturing space close to launch sites that can store rockets, space shuttles, satellites and any parts used to build and maintain them.

Hines’s $500 million project in partnership with local developer Key Group highlights a shift in the real-estate industry. Developers are increasingly looking to niche industries as offices and some retail struggle, and as apartment-rent growth slows. Some property firms are building data centers to capitalize on the growth of artificial intelligence. Others, such as Hines, are turning to outer space.

“Aerospace is really a new and emerging supply chain,” said Ryan Wood, managing director of industrial development and acquisitions at Hines for the Southeast region. “We feel like the real-estate industry hasn’t quite kept up.”

Rockets and spaceships are big and expensive, making it hard to transport them to launch sites by road or rail. They also require an army of suppliers. That creates demand for storage and manufacturing facilities close to launch sites.

The development also shows how the space industry is transforming a mostly sleepy coastal stretch east of Orlando. Hines and Key Group control a 450-acre property in Titusville, a short drive from the Cape Canaveral rocket-launch site. The developers plan to break ground on the project’s first three warehouses spanning 639,000 square feet in early 2024 and complete them in 2025, Wood said.

The companies said they are in talks with possible tenants but haven’t signed any leases yet. The total project will span around 3 million square feet.

SpaceX has launched rockets from Cape Canaveral, and companies such as Blue Origin, Boeing and Lockheed Martin have facilities nearby. Despite the booming space business, the area still has relatively little warehouse space, pushing up rents.

“It is very tough to find space out there right now,” said David Murphy, an executive vice president at real-estate brokerage CBRE. That makes the area appealing to developers despite higher interest rates, which have pushed up the cost of buying and building real estate.

Hines and Key Group aren’t the only developers looking to build warehouses for the space industry. Florida real-estate firm Onicx Group and partner Aries Capital have announced plans to build a 1-million-square-foot industrial park in nearby Edgewater. Still, Murphy said high interest rates and stingy lenders mean few developers can make the math work.

Key Group’s principal Kathleen Yonce said she began looking for land near Cape Canaveral in 2019. The company signed a deal to lease the site from the Titusville-Cocoa Airport Authority in 2022 and brought on Hines as a partner this year.

Building warehouses for space companies has its challenges. Because rockets are a lot bigger than Amazon packages, the distance between columns needs to be longer and roads need to be wider. But for the most part the buildings will look like any other warehouse, Yonce said.