Introduction
As defence budgets surge across Europe and the UK, real estate investors are discovering new opportunities in logistics, infrastructure and aviation. Our latest article explores how the defence sector is becoming a strategic frontier for real estate investment.
Real estate meets defence: A strategic opportunity in a shifting geopolitical landscape
As geopolitical tensions intensify across Europe – most notably due to the ongoing war in Ukraine – governments are ramping up defence spending to unprecedented levels. This surge is not only reshaping military capabilities but also creating new opportunities for real estate investors and developers.
Our internal analysis suggests that the defence sector, along with adjacent industries such as logistics and aviation, is emerging as a strategic frontier for real estate investment.
A surge in demand for defence-linked assets
According to the European Defence Agency (EDA), defence expenditure across EU member states rose by 19% from 2023 to 2024, reaching EUR343 billion, or 1.9% of GDP. It’s projected to reach EUR392 billion, or 2.1% of GDP, in 2025 – surpassing NATO’s 2% guideline
Investment in defence infrastructure – including logistics hubs, production facilities, and secure storage – is expected to continue to rise, with EUR106 billion allocated for defence investment alone in 2024. This upward trend is set to accelerate, with defence investment forecast to reach nearly EUR130 billion in 2025, driven by large-scale procurement programs, infrastructure modernization, and strategic readiness initiatives across EU member states.
According to Savills, rising defence budgets and NATO’s new 3.5% GDP target for core military capabilities over the next seven years could generate demand for up to 37 million m2 of additional industrial and logistics space across Europe by 2033. In the UK alone, this could translate to 3 million m2 of new demand, with annual take-up rising by 64% to over 1 million m2, compared to current averages.
Key country-specific highlights
- Germany: Military expenditure surged to USD88.5 billion in 2024, making it the fourth-largest military spender globally and the highest in Central and Western Europe. This represents a 28% increase from 2023, driven by the continued rollout of the EUR100 billion special defence fund established in 2022. Major investments focused on procuring tanks, submarines and artillery ammunition and could continue with the modernization of logistics and air mobility infrastructure.
- UK: Defence spending reached GBP53.9 billion in 2023/24, supporting a broad modernisation programme that could include upgrades to military bases, expansion of secure warehousing near strategic ports and airfields, and increased funding for equipment procurement and R&D. Looking ahead, the UK has committed to increasing defence spending to 2.5% of GDP from April 2027, with an ambition to reach 3% in the next parliament, marking the biggest sustained increase in defence investment since the Cold War.
- France: Defence spending reached EUR50.5 billion in 2025, aligned with the trajectory of the Military Programming Law (LPM) 2024-2030, which plans a total of EUR413 billion over seven years. This budget could be allocated to aerospace capabilities,cybersecurity infrastructure, and the modernization of core military assets, reflecting France’s strategic pivot in response to evolving geopolitical threats.
- Spain: Defence spending is set to reach 2% of GDP in 2025, up from 1.4% in 2024, following an additional investment of EUR10.47 billion under the newly approved Industrial and Technological Plan for Security and Defence.
- Poland: Defence spending rose from 2.7% of GDP in 2022 to 4.2% in 2024, with a projected increase to 4.7% in 2025, reflecting one of Europe’s fastest-growing defence budgets.
These figures, which reflect a sharp rise in defence budgets across several countries, point to a broader trend: defence is no longer a siloed sector. It should now be viewed as part of a wider strategic framework, closely tied to national infrastructure and real estate planning.
A substantial share of the growth driven by increased defence budgets is expected to concentrate in key defence and logistics markets – including the UK, France, Germany, Italy, and Spain – where infrastructure, supply chains, and strategic readiness are already well-developed and expanding.
Real estate implications: Where the opportunities lie
Our internal analysis identifies six key asset classes where real estate intersects with defence strategy:
- Production facilities
Secure, high-specification sites for manufacturing defence equipment such as ammunition, vehicles and aircraft components. These facilities often require enhanced security protocols and proximity to skilled labour pools. - Logistics properties
Warehouses and distribution centres located near NATO logistics corridors or military bases. These assets support the storage and movement of critical materials and equipment, offering long-term lease stability. - Military infrastructure
Includes barracks, depots and training grounds. These are frequently developed through public-private partnerships (PPPs) or structured as long-term government leases, providing predictable returns. - Office and R&D spaces
High-tech campuses for defence contractors, cybersecurity firms, and government agencies. ESG-compliant design and secure access are key features, especially for facilities handling sensitive data or innovation. - Residential properties
Housing developments for military personnel and their families, often located near bases. These projects must balance social compatibility, ESG standards and long-term tenancy models. - Aviation infrastructure
Airfields, hangars, and support facilities for military and dual-use aviation. These are particularly relevant in border regions and strategic transport hubs, where rapid deployment capabilities are essential.
These assets offer long-term stability, government-backed leases, and strategic relevance, making them attractive to both institutional investors and private equity.
Legal and strategic considerations
Investing in defence-related real estate requires navigating complex regulatory frameworks, including national security restrictions and procurement protocols. Legal advisors play a critical role in structuring transactions, conducting due diligence, and ensuring compliance with defence sector regulations.
Joint ventures, PPPs and sale-leaseback models are increasingly used to finance these developments. But investors have to be mindful of reputational risks and ESG considerations, particularly when assets are linked to weapons manufacturing.
Conclusion: A strategic moment for real estate in defence
The timing is critical. European governments are actively implementing increased defence budgets, and the real estate component is becoming central to operational readiness. With infrastructure needs expanding rapidly – from logistics hubs and secure production sites to housing and aviation facilities – the opportunities for real estate investors and developers are both real and growing.
The convergence of defence strategy and real estate investment is no longer theoretical – it's operational. For real estate players, this sector offers a compelling blend of long-term stability, strategic relevance, and ESG-sensitive development. These assets are not only mission-critical but also aligned with broader sustainability and resilience goals.
For international clients looking to enter or expand in Europe and the UK, the defence sector presents a unique opportunity to contribute to national resilience while securing stable, long-term returns. As legal advisors, we're committed to guiding our clients through the regulatory, financial, and strategic complexities of this evolving landscape – with clarity, compliance and confidence.
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