NATO target to drive industrial & logistics growth, says Savills

Savills predicts that increased defense spending, driven by NATO's 3.5% of GDP target, could generate demand for an additional 37 mln m² of industrial and logistics space in Europe by 2033. 

Logistics

This translates to a potential 17% increase in take-up compared to the 30 mln m² seen in 2024.
Current defense spending in Europe already supports approximately 35-40 mln m² of such space and employs nearly 1 million people. Reaching the 3.5% target within seven years could create a need for an extra 34 mln m2, largely concentrated in the UK, France, Germany, Italy, and Spain.
In the UK specifically, Savills forecasts defense-related manufacturing and logistics employment to grow by 45,160 and 16,970 jobs, respectively. This job creation could drive demand for up to 3.0 mln m² of additional space in the UK over seven years, averaging 423,000 m² annually. This boost could increase manufacturing-related take-up by 64%, rising from an average of 657,000 m² to 1.08 mln m² per year.
Within the overall UK industrial and logistics sector, this new demand is comparable to the annual warehouse space taken up by high street retailers. Savills estimates that defense-related demand could account for 13% of total UK take-up, assuming consistent take-up levels in other sectors.
Sam Quellyn-Roberts, director in the EMEA industrial & logistics occupational markets team, commentеd: "Defence firms and their suppliers tend to cluster together across Europe, benefitting from shared skilled labour pools, specialised sub-contractors, and established supply chains. These clusters not only concentrate employment, but also drive up demand for industrial & logistics space in those areas. However, it is important to note that the defence sector has very specialised real estate requirements, which means that servicing this expected demand may not be as straight forward as more traditional retail or logistics occupiers."
Andrew Blennerhassett, associate director in the industrial & logistics research team at Savills, addеd: "Unlike commercial occupiers, defence organisations must navigate stringent security protocols, geopolitical sensitivities and bespoke infrastructure requirements, all while competing with booming e-commerce and manufacturing sectors for limited suitable space. International, national and local policymakers will need to recognise this and take a proactive stance in ensuring land availability aligns with anticipated industrial & logistics expansion."