The impact of rising defence spending will have far-reaching consequences on UK and European property markets
Hybrid warfare necessitates industrial reinvention
The Ukraine conflict has exposed the need to rethink pre-2022 NATO doctrines. Sustained artillery and drone warfare require a shift toward scalable, agile defence manufacturing. The Strategic Defence Review (SDR) calls for digital integration, nearshoring, and NATO-wide industrial collaboration to ensure readiness in a prolonged, resource-intensive conflict environment.
Defence spending growth will drive real estate expansion
Rising defence budgets—potentially reaching 3.5% of GDP – will generate up to 37 million sq m of new logistics and manufacturing demand by 2033. This includes bespoke facilities for munitions, aerospace, and secure storage. The majority of this demand will likely be located in major manufacturing economies, but smaller nations will need greater storage space for their expanding capabilities.
Planning policy must enable defence-linked development
To meet the UK’s SDR ambitions, government must streamline planning, repurpose public land, and support defence-focused clusters. Designating key sites as Nationally Significant Infrastructure Projects and investing in workforce training will be essential. Without proactive policy, land constraints and labour shortages could stall the sector’s real estate and employment potential.
Regional demand will not be uniform
Defence manufacturing expansion will not be evenly distributed across the UK and Europe. Countries with established industrial bases – such as France, Germany, the UK, and Italy – are best positioned to absorb increased demand. In contrast, smaller or less industrialised member states may rely on imports or partnerships, reinforcing regional imbalances in defence sector capacity.
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