Defence spending to drive European real estate growth

New research from BNPP AM Alts highlights how increased defence spending will drive the performance of European real estate.

Justin Curlow

As European nations boost their defence budgets and aim to increase domestic manufacturing, Europe's share of defence production is expected to grow. This could lead to significant demand for industrial and logistics real estate. If defence spending reaches 2.9% of GDP by 2030, it could create approximately 233,000 new jobs and require an additional 16 million m2 of industrial and logistics space.

France, Germany, and the UK are projected to experience the highest demand, particularly in areas with existing defence industry clusters that offer specialised labour and innovation networks. The report delves into each of these markets in detail.

While major defence companies often prefer custom-built, owner-occupied facilities within these established clusters, their extensive network of suppliers frequently leases standard industrial spaces. This creates a substantial real estate opportunity, making flexible logistics units and strategic land development more attractive and lower-risk investment prospects for investors.

Justin Curlow, head of Global Research and Strategy at BNPP AM Alts, added: “The short-term focus on rearmament as Europe accelerates its defence spending is expected to generate additional warehouse and manufacturing. This boost in industrial net absorption should provide meaningful investment opportunities to acquire both standing assets and new development opportunities. Locations that cater to this burgeoning demand segment alongside the wider bulk warehouse and distribution segments should be best positioned to outperform.”