Already employing close to one million people across the continent, Europe’s rearmament could stimulate significant demand for industrial and logistics space
In Europe, the data is harder to collate. We’ve used AI to collate data from various press releases, industry articles, and government documents to estimate direct and indirect employment in the manufacturing and logistics-related defence sectors. These figures for the largest countries are corroborated by official sources: France’s base industrielle et technologique défense (BITD) estimates 200,000 jobs; Germany’s Economic Institute (IW) estimates 225,000+ jobs, including suppliers; Italy’s Mediobanca reports 181,000 jobs, 54,000 direct, and official data from Spain suggests the defence industry supports 75,000 jobs, including 25,000 direct roles. Smaller-country figures are approximate, inferred from known defence companies and NATO reporting.
Taking these national estimates into account, we compare the figures against each country’s current defence spending as a share of GDP and compare this against the proposed 3.5% NATO target.
There are a few caveats to this beyond the use of AI. Firstly, we assume that usage density for each sector is in line with that of the UK. Secondly, we assume that employment will increase in a uniform manner relative to the increase in defence spending. Finally, we assume a best-case scenario for each country, assuming that all member states achieve the 3.5% target.
It is also worth noting that increases in each country will not result in uniform manufacturing or logistics growth. Many smaller member states are likely to allocate more of their expenditure towards purchases of defence equipment from larger producers such as Germany, France, Italy, the UK, and the US. This will likely mean a greater proportion of their expenditure supporting logistics- and storage-related real estate needs. That said, this will balance out on aggregate, with manufacturing-focused markets seeing outsized growth in manufacturing to meet export-led demand.
If member states converge toward the 3.5% target over the next seven years, we project an additional 37 million square metres of demand
Kevin Mofid, Head of EMEA Logistics Research, Commercial Research
Following Russia’s annexation of Crimea, NATO introduced a new defence spending target of 2% of GDP. While most member states have spent significantly less over the past decade, Russia’s invasion of Ukraine has triggered substantial increases in defence budgets – particularly in Eastern Europe and the Baltic states. In response, we have assumed an expansion to 5.0% of GDP for Finland, Estonia, Latvia, and Poland, given that these nations are already exceeding the 3.5% target and have previously stated plans to expand defence expenditure further.
However, many member states – most notably Spain and Italy – remain well below this threshold, spending just 1.28% and 1.49% of GDP, respectively. Based on historical patterns, we expect countries bordering Russia and Belarus to exceed the 2% target. This implies that Spain and Italy will need to make significant increases to reach the proposed 3.5% benchmark, resulting in disproportionately high growth in defence-related demand. Notably, Spain has publicly stated that it does not consider the 3.5% target binding, making such increases unlikely. As such, our estimates represent an upper bound on potential demand.
Based on our analysis of current defence-led manufacturing and logistics employment across the UK and Europe, we estimate that existing defence spending supports approximately 35–40 million sq m of logistics and manufacturing space. If member states converge toward the 3.5% target over the next seven years, we project an additional 37 million sq m of demand.
Roughly two-thirds of this growth is expected to concentrate in France, Germany, and Italy. Countries with larger manufacturing bases, such as France, Germany, and the UK, are likely to exceed our forecasts as they absorb excess demand from member states with smaller arms industries.
Beyond these major producers, we anticipate significant expansions in the Netherlands, Sweden, and Poland. Sweden and Poland, in particular, may experience above-average growth due to their proximity to Russia, which increases perceived risk and drives demand for storage of NATO equipment and garrisons. Among these, Sweden is projected to see the largest increase in required defence space (up to 1.4 million sq m) followed by Poland (750,000 sq m) and the Netherlands (600,000 sq m).
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