According to a recent report by Savills, rising defence spending and new NATO commitments will lead to a significant increase in demand for industrial and logistics real estate across Europe and the UK.
In order to meet the increasing direct and indirect logistics demand, a need for up to 37 million square meters of additional space could arise – 6 million of them in Germany.
Taking into account the new target of allocating 3.5% of GDP to core military competencies adopted at the NATO summit in June 2025, Savills concludes that demand for industrial and logistics space in Europe is likely to increase significantly – by 17% compared to around 30 million square metres in 2024.
Nearly one million people are already employed in the defence sector in Europe. According to Savills' calculations, current defence spending supports around 35 to 40 million square metres of logistics and production space. If the NATO countries achieve their new goal within the next seven years, this would create additional demand, especially from Great Britain, France, Germany, Italy and Spain.
In Germany, the defense budget was expanded this year by a special fund of 86 billion euros. The German government has also announced that it will increase military spending to up to 3.5% of GDP by 2029. This would strengthen the German defence industry in the long term and significantly increase the demand for production and logistics space. In view of the planned major projects, including the procurement of new Eurofighters, the modernization of the Taurus cruise missiles and investments in tank, drone and air defense systems, Germany is one of the core markets in which the projected additional space requirements will be realized in the coming years.
years. According to the Bundeswehr's Infrastructure Report 2024, the number of infrastructure construction measures in the defence sector for which the state was responsible in 2024 was around 8,000 and included a project volume of approx. 1.6 billion euros. An investment volume of 1.7 billion euros has been set for 2025. In addition to these government projects, the industry is also pushing ahead with its own projects, for example through Rheinmetall's most recent new production buildings, including an ammunition factory in Unterlüß, which are specifically driving forward the expansion of national production capacities.
Bertrand Ehm, Director Investment at Savills Germany, comments: "The German defence sector has clearly adapted to the changed political conditions over the past year and has noticeably expanded its production and infrastructure capacities. This includes new plants for ammunition, aircraft components and optical systems as well as the increased expansion of military properties."
Sam Quellyn-Roberts, Director of the EMEA Industrial & Logistics Occupational Markets Team, comments: "The defence sector, like many other manufacturing industries, benefits significantly from agglomeration advantages. Defence companies and their suppliers tend to cluster across Europe to benefit from shared pools of skilled workers, specialised subcontractors and established supply chains. These clusters not only concentrate employment but also drive up the demand for industrial and logistics space in these areas. However, it is important to note that the defence sector has very specific requirements for real estate, which means that meeting this expected demand may not be as easy as it is for more traditional retail or logistics tenants."
For the UK, Savills expects that the implementation of NATO's target of 3.5% of GDP in defence spending could create around 45,000 additional jobs in manufacturing and 17,000 in logistics within seven years. This would be associated with additional demand of up to 3 million square metres of industrial and logistics space, which corresponds to an annual take-up of around 423,000 square metres.
Andrew Blennerhassett, Deputy Director of Industrial and Logistics Research at Savills, adds: "The defence sector's need for
Specialized industrial and logistics facilities represents a complex challenge for the real estate market. There are strict security protocols, geopolitical sensitivities and tailored infrastructure requirements to consider, while competing with the booming e-commerce and manufacturing sectors for limited suitable space. Ultimately, the lesson to be learned from the pandemic is that well-functioning, diversified, and robust national logistics ecosystems are critical to a functioning manufacturing industry, and defense is no exception. International, national and local policymakers need to recognise this and proactively ensure that space availability keeps pace with the expected expansion of industry and logistics."
