JLL tracks six trends in hot DOD real estate market
The value of U.S. Department of Defense-awarded contracts is fast approaching $500 billion annually for 2024, according to Bloomberg Government estimates. Increases in funding at both the federal and venture-capital levels for aerospace and defense (A&D) companies will likely lead to increased leasing activity in the future.
As the A&D sector heats up, market watcher JLL has identified six aerospace and defense real estate trends to watch in 2025:
•Emerging markets will be catalysts for growth as firms strategically target regions with strong talent and cost advantages: Since January 2020, there have been five markets that have seen their A&D job postings increase by over 300%, according to Lightcast estimates: Wichita, Kan.; Grand Rapids, Mich.; Savannah, Ga.; Cincinnati and Indianapolis. During that same period, eight of the 10 biggest aerospace and defense markets saw a reduction in industry job postings (see chart). As the landscape continues to evolve, companies will strategically target emerging areas due to growing talent pools, access to suppliers, business-friendly environments and short- and long-term cost advantages.
•Defense contractors will seek out cost-effective solutions: The demand for Sensitive Compartmented Information Facilities (SCIF) space, alongside new government regulations that require facility upgrades, is prompting contractors to find innovative, cost-effective solutions for secure workspaces. More than one-third—35%—of government contractors uses “classified space as a service” companies. That model is emerging as a flexible, turnkey option for contractors, and presents an opportunity with aerospace and defense companies that have yet to adopt it.
•The human experience will be central to design as the workplace is used for talent attraction and retention: A JLL-conducted survey of leading aerospace and defense contractors found 44% of respondents reporting that 51% to 75% of employees are utilizing some schedule of hybrid work. Consequently, more than half of respondents has increased its enforcement of work-from-home policies and guidelines over the past year. Unlike other industries, the aerospace and defense sector often has unique space requirements due to the secure nature of the work. So it will be imperative for the aerospace and defense industry to create a workplace, across all asset types, that prioritizes the human experience.
•A&D companies will use advanced technologies and AI to enhance operational efficiencies and inform portfolio strategy decisions: JLL contends that data-driven technologies will enable more efficient resource allocation, predictive maintenance and data-backed portfolio optimization opportunities. A JLL-conducted survey found that 82% of leading A&D companies are either investing or are exploring investment in AI technology. Facilities management and portfolio strategy are the top two areas where aerospace and defense leaders believe AI will be the most impactful.
•As demand for industrial space in the A&D sector increases, firms will continue to prioritize strategic portfolio management: A&D firms will leverage their real estate portfolio for cost savings, with varying impacts across asset types due to differing demands for space. The persistence of hybrid work will prompt firms to reduce their office space, as 60% of leading aerospace and defense companies now require employees to be in the office at least three days per week to have an assigned seat.
