Los Angeles has a very large aerospace industry and long history in it. Northrop Grumman, Boeing, Lockheed Martin, Raytheon, and SpaceX all have a large presence in Los Angeles's South Bay. It's not as large as it was during the "cold war" but a lot of skilled employees still live in the area.

SpaceX is located on a campus previously created for building aircraft, so it seems they are where they need to be. https://en.wikipedia.org/wiki/SpaceX#Facilities

Also, that part of LA (hawthorne, el segundo), has a history of aviation and rocketry companies, so it has better facilities and a larger built-in talent pool too.

They do co-locate some operations (tesla designer lives in the SpaceX office, not the tesla office), but it makes sense for Tesla, as a consumer brand, to be located in the most densely concentrated location of multimillionaires and billionaires in the world.

He has stated that most of the experienced aerospace engineers live there and it would be a hard sell to get many of them to relocate.