What do Amazon’s Jeff Bezos, Tesla’s Elon Musk and Lockheed Martin all have in common? They, along with a dozen or so technology, aerospace and defense companies, are investing in the Florida Space Coast, Brevard County and the Melbourne, Fla., region as a launch point to advance their missions in space. It’s not surprising that this investment activity is fit to elevate Melbourne as the anchor city of economic growth in the region as several notable developments are already boosting the local economy.
A surge in aerospace and defense developments
In July 2019, Lockheed Martin moved its fleet ballistic missile headquarters from California to their campus in Brevard County and intends to invest about $40 mio into the campus. The firm has already moved 350 employees and will likely be adding new jobs as all missile contracts will now come out of this location in the Space Coast, as reported in Florida Today. This development comes on the heels of the $7.2 bln contract Lockheed received from the US Air Force to build 22 GPS satellites, which resulted in Lockheed filling 1K job openings for its offices in Orlando, Melbourne, Cape Canaveral, and Titusville.
Blue Origin, the company led by Jeff Bezos, has already invested more than $1 bln into the area to build its 750K-square-foot New Glenn factory at Kennedy Space Center’s Exploration Park and intends to almost double the campus size in the coming years and bring hundreds of employees and potentially thousands of tourists. Bezos’ announcement on October 22 of the national team for Nasa’s Artemis human landing system, comprised of Lockheed Martin, Northrop Grumman and Draper, will no doubt stir speculation about new job openings and additional investment into the area from these firms.
Growth is also continuing for Elon Musk’s SpaceX, which in May 2019 launched its Falcon 9 rocket along with 60 Starlink satellites to start the company’s own internet service. It is reported that SpaceX intends to develop its own rocket factory in Brevard County.
L3Harris Technologies, born from the recent merger of L3 Technologies, Inc., an aerospace tech company, and Harris Corporation, a defense contractor, is now the largest aerospace and defense company based in Florida and a top 10 defense company worldwide. The new company, which has $17 bln in annual revenue, chose to keep its headquarters in Melbourne, Fla., and has plans to expand the local workforce there.
And NASA is currently developing its most powerful rocket yet, the Space Launch System, with the help of local aerospace firms, including Lockheed Martin, Boeing and Northrop Grumman.
The evolving Space Coast
Given all this activity in the region, it makes sense that it caught the eye of business magnate Sir Richard Branson and sparked his interest in building an expanded train line to connect Central and South Florida. Virgin Trains USA, formerly Brightline and now in a strategic partnership with Virgin Group, is building a $4 bln Orlando-to-Miami route straight through the heart of the Florida Space Coast. Phase 2 of the project commenced in May 2019 and is generating more than 10K jobs and more than $650 mio in revenue.
The region is also getting global attention. In Melbourne, the International Organization for Standardization (ISO) held its congress at Florida Tech University in September with delegates from 164 countries, as per Florida Today. Previous congresses have been held in major cities like Paris, Berlin, and Tokyo. Choosing Melbourne to host the event this year is indicative of the Space Coast’s increasing prominence globally.
With all the amazing job opportunities these projects are generating, it’s no wonder that USA Today is calling the Space Coast the “next Silicon Valley”, attracting millennial scientists and engineers eager to be a part of the next big thing.
Living the beach life
The Space Coast also has another advantage — its prime location to the beach. Melbourne was ranked No 1 in the United States as the best place to live near the beach, beating out San Diego, Calif., Sarasota, Fla., and Honolulu, Hawaii. The ranking is published by US News & World Report and the locations are based on the order in which they appear on the overall Best Places to Live List where Melbourne is ranked 29 out of 125.
Another big selling point: its low cost of living. Compared to Silicon Valley’s Palo Alto, where homes average over $3 mio, the median price of a house in Melbourne is $194K, according to Zillow. Plus, Florida has no state income tax, whereas California has the highest rate in the United States.
But the best part is the Florida sunshine. With temperatures rarely dipping below 70 degrees Fahrenheit in Melbourne, residents there can enjoy an active outdoor lifestyle filled with golf, tennis, kayaking and deep-sea fishing. Pristine beaches stretch along the Space Coast’s Indian River Lagoon, which boasts one of the most biodiverse estuaries in the Northern Hemisphere. And there is always some cool art exhibit or cultural event to catch in the revitalized Eau Gallie Arts District, bringing a youthful vibrancy to the community.
Real estate investing opportunities
Indeed, the Space Coast region is catching the eye of many, including the real estate investment management sector. “The Florida Space Coast is prime for investing in real estate thanks to the billions of dollars being pumped into the region by leading tech and space companies,” said Francis Lively, Chief Executive Officer and President of The LCP Group, L.P. (LCP), a 45-year-old real estate investment management firm based in New York. “We are seeing an increase in demand for hotels and other assets due to the dynamic changes in the area, especially in the underserved market of Melbourne where the city council unanimously approved plans to develop a 180-key hotel property by Hilton dubbed Hotel Melby.”
A part of the Hilton’s Tapestry Collection, Hotel Melby is slated to open in early 2020 and will be Melbourne’s first hotel in the downtown neighborhood and one of its key attractions. At 11 stories high, this Hilton property will become the city’s tallest building and boast incredible city and water views from its indoor-outdoor rooftop lounge. Located just two miles away from the Orlando-Melbourne International Airport, the hotel also will be perfectly situated to welcome high-profile corporate guests visiting the Space Coast on business as well as leisure travelers and tourists.
As an incentive for the Hilton project, the city of Melbourne is providing a $2 mio US Housing and Urban Development loan and will give the developers more than $800,K in property-tax reimbursement over a 20-year span. The city also sold the developers the .6-acre plot of land for $500K, well below market value. In addition, the hotel is a qualified EB-5 investor visa project sponsored by LCP, which will raise a portion of the capital from foreign investors through the EB-5 program. According to the feasibility study conducted by leading hotel consulting firm HVS, given the uniqueness of this project’s economics, Hotel Melby will be a high-yielding opportunity in which investors have the potential to double the amount of their investment.
The EB-5 Immigrant Investor Program is run by the United States Citizenship Immigration Service and raises capital from foreign investors to finance job-creating real estate projects across the United States. Each foreign investor, and eligible family members, may obtain a permanent US green card by investing in an EB-5 project provided program requirements are met. Upon moving to the United States, the investor and family may live, work and go to school wherever they like with no sponsorship required.
“Unlike traditional EB-5 projects where investors receive a de minimis fixed return with no upside potential, this particular EB-5 opportunity gives investors the advantage of sharing in the project’s anticipated success, which will be realized after the sale targeted for year five,” said Lively. “The Virgin Trains USA new train line and the ongoing growth in the region will positively impact this property which naturally may translate to better returns for our domestic and foreign investors.”
The economic outlook
No doubt, the influx of industry from Blue Origin, SpaceX, Lockheed Martin and others tied to the space field is creating jobs, spurring commerce, and driving the economy. All of which leads to higher real estate values. As noted by Brian Alford, an economist for CoStar Market Analytics, the Space Coast is benefiting from population and job growth rates that have outperformed the rest of the United States in recent years.
Local leaders have successfully worked to diversify the Space Coast economy and even have implemented special taxing districts for new businesses that move to the area, as reported by The Washington Post. Residential communities are being built up and down the coastline, housing prices seem to be on the rise and the tax base has bloomed with monthly taxable sales at more than $850 mio in 2018.
“With all that it has going for it, the Space Coast is clearly primed to rise as a technology and innovation leader in the State of Florida and nationally,” said Lively. “We are excited to be contributing to the economic growth in the area and are seeing a huge demand from foreign investors seeking to participate in our hotel opportunity.”
There may be no better time than now to invest or buy real estate in Melbourne and Brevard County Florida. Perhaps Branson, Musk, and Bezos are onto something.
By Denis Karasev, LCP Group representative in Russia