Texas Is Winning Aerospace Investment. Now It Must Win The War For Talent

As funding and development in the aerospace, aviation and defense industries have ticked up over the past year, Texas has positioned itself to reap the benefits. 

But the workforce isn’t keeping pace. This could lead to a “war on talent” as companies compete nationally for workers with the skills they need, one expert said. 

The aerospace, aviation and defense industries are growing in the U.S. Passenger volumes exceeded pre-pandemic levels in the commercial aviation space starting last year, said Tom Taylor, the managing director of JLL’s aerospace and defense business and a former U.S. Air Force officer. The U.S. Department of Defense also began responding to geopolitical challenges and the general need to modernize the military and weapons, he said. 

These two factors explain why the DoD-funded aerospace manufacturing contract volume surpassed $115B for the first time ever in 2023 after falling by more than 40% in 2021 and 2022, according to JLL data.

Texas has been a huge beneficiary of that growth. The Dallas-Fort Worth metropolitan area alone captured 36% of the national aerospace manufacturing award volume in 2023. The state also captured $27.4B, or about 47%, of the DoD’s space and aircraft contract award volume in 2023, according to JLL data provided to Bisnow.

These awards often lead to real estate demand. Lockheed Martin in Fort Worth received an $841M contract modification from the DoD in September, and in March it expanded its Fort Worth operations to include a 163K SF storage and distribution facility.

Texas has become a desirable market as aerospace companies look to be competitive, drive efficiencies, be in favorable regulatory environments, and have access to talent and a relatively cheap cost of living, Taylor said. The presence of NASA, which earned Houston the nickname “Space City,” also draws other related businesses.

“I think Texas right now is checking a lot of those boxes,” he said.

A case in point is NASA ramping up the development of its 240-acre Exploration Park at Johnson Space Center in southeast Houston this year. Texas A&M University System signed a 30-acre lease agreement there to build its Texas A&M Space Institute, a $200M facility. The American Center for Manufacturing and Innovation, a defense manufacturer, agreed to lease 207 acres for its Space Systems Campus. Both leases were signed in February.

Recent advancements in technology and artificial intelligence have furthered aerospace and space exploration companies’ missions, said Sherra Gilbert, Houston-based research manager for Cushman & Wakefield. 

“Because of these advancements, companies are recognizing that the investments they make into the aerospace industry in Houston is a promising venture, given the city’s historical significance in space exploration,” Gilbert said. “Aerospace is not new to Houston, but … it’s almost a race. Everybody wants to be first. So we’ve seen a lot of investment.” 

Examples abound across the state. Bell Textron is considering building a $157M advanced manufacturing plant in the Fort Worth Alliance submarket.

The San Antonio Tech Port has also seen its aerospace and aviation investment take flight recently. Over the past six years, the Tech Port has added more than 8,000 jobs and leased out 750K SF, doubling its managed lease revenue and resulting in a 95% occupancy rate, Port San Antonio President and CEO Jim Perschbach said. 

Netherlands-based company Xyrec introduced a 72-foot tall robot at the Tech Port in 2020 that can strip the paint off of an airplane in five days with two operators. That process usually takes 12 operators 11 days. 

Boeing expanded its San Antonio presence in 2022 by opening The Boeing Center, an entertainment venue that will also teach students about cybersecurity, artificial intelligence, robotics and 3D printing. Late last year, the center added an aerospace exhibit.

“Bringing the companies, the talent, the technologies that support what they’re doing is an important part of our development strategy,” Perschbach said. 

E-Space, a satellite communications company, plans to build a 750K SF manufacturing and office facility at the Arlington Municipal Airport. That project should bring at least 400 high-tech jobs with an average salary of $95K within its first five years of operation, and 2,000 jobs over the next decade.

But just because jobs are created doesn’t mean there will be someone to fill them. That’s something every company in the aerospace and defense industry needs to consider right now, JLL’s Taylor said.

“For Dallas … they’ve had all these contract wins,” Taylor said. “Yet the actual manpower and the capacity of the skillset there isn’t as great there as in some other places.” 

The aerospace markets seeing aggressive growth will try to attract talent from other regions of the country, he said. They’ll likely use what Texas has to offer, like a favorable cost of living and spacious accommodations, he said.

“With this increased demand, there's a finite amount of capacity right now,” Taylor said. “I think that there's going to be a bit of a war on talent.” 

That battle will be concentrated in the Pacific Northwest, California and parts of Texas, Taylor said. Aerospace companies are especially keen on driving efficiencies through things like real estate cost savings, but they still need to be near clients, attract and retain talent and compete against other businesses, he said.

“There’s just not a foregone conclusion anymore like ‘I’m going to be in Seattle, I’m going to be in LA,’” he said. “Companies are saying ‘How can I look at every possible thing to gain that competitive advantage so I can capture as much of this increased demand as I can?’” 

Skilled workers can be choosy about the environment they work in, which is something companies must consider with their real estate decisions, he said.

“The workplace experience is broader than just, ‘Hey, is my facility nice?’” Taylor said. “It's the experience that people are getting when they come to their workplace … it really just isn’t about a square footage.” 

People want a place where they can collaborate, feel like they’re doing something mutually beneficial for their company, have a reasonable commute and access amenities, he said.

Companies are bolstering their workforce pipelines by helping to create relevant programs at nearby colleges and universities. The University of Texas at El Paso received a $5.3M grant from the Air Force Research Laboratory last year that it will use to fund aerospace and defense manufacturing-related education. Texas Woman's University last year decided to add a school of aeronautical sciences, made possible partly by a $15M gift from the Doswell Foundation. 

Houston City Council is allowing $5.5M of its Airport Improvements Fund to help Texas Southern University build a flight academy at Ellington Airport in southeast Houston. Texas Gov. Greg Abbott last month launched a Texas Space Commission to cement Texas as a space leader and called on universities to create space engineering degree programs. 

Meanwhile, some companies are starting education programs themselves. Maintenance, repair and overhaul company StandardAero opened a paid aerospace training program in June 2023 at its 810K SF San Antonio facility. It can support up to 200 new mechanics annually. 

StandardAero started the program to coincide with its agreement to service the engine that powers Airbus A320neo and Boeing 737-MAX fleets, knowing it would need more maintenance workers and mechanics, StandardAero Vice President of Business Development Dan Gonzales said.

“Any time you have an increase in demand for a skillset, you’re going to have to prepare for competing against other companies,” Gonzales said. “Our goal is to control that process as much as possible by creating our own training program.” 

StandardAero’s training program fits well in San Antonio, where there is labor elasticity, Perschbach said. Some people see some parts of the city as undereducated, he said.

“My response is that just means you’ve got an awful lot of people that with relatively minimal effort you can provide the training and support to and fill these positions,” he said. “As compared to a place where there’s a lot of tightness in the labor market and you’re now poaching people away from each other.”

Hiring and retaining qualified workers is one of the top challenges across all industries, and aerospace is no different, Cushman & Wakefield’s Gilbert said.

“Their struggle is they fight for a skilled worker [while] making the salary be economically beneficial to the venture,” she said.

But Texas has population, job market and business growth on its side, Gilbert said. Plus current investments will likely entice more companies to set up shop in Texas, bringing more business and people with them, she said. 

“You get a momentum going, and then it’s a race for everyone to be in on the same,” Gilbert said. “We’ve definitely seen an increase in startups, new venture capital come in, and everybody wants to be in on the action.”