According to the new Savills report “Savills Defence Logistics 2025”, the increase in defence spending, under the UK’s Strategic Defence Review (SDR) and NATO’s new commitments, is expected to drive strong demand for industrial and logistics real estate across Europe and the UK. This trend is estimated to generate up to an additional 37 million sq m of space to meet growing direct and indirect logistics needs.

Based on the new target set by NATO at the June 2025 summit – investing 3.5% of GDP in essential military capabilities – Savills estimates that industrial and logistics demand in Europe could rise by 17% compared to the 30 million sq m absorption recorded in 2024.

Currently, defence spending employs around 1 million people across Europe and supports approximately 35 to 40 million sq m of logistics and production space. However, if countries move towards the 3.5% target over the next seven years, additional demand of 37 million sq m could emerge. This growth is expected to be particularly concentrated in the UK, France, Germany, Italy, and Spain.

Sam Quellyn-Roberts, Director EMEA Industrial & Logistics Occupational Markets at Savills, comments: “As with many manufacturing industries, the defence sector largely benefits from economies of agglomeration. Defence companies and their suppliers tend to cluster in certain hubs across Europe, capitalising on skilled labour, specialist subcontractors, and established supply chains. These clusters not only attract further employment but also generate greater demand for industrial and logistics space in these regions. However, it is important to note that the defence sector has very specific real estate requirements, which means responding to this demand will not be as straightforward as with traditional logistics or retail operators.”

Potential Impact in Portugal
Although there are no specific figures for the Portuguese market, Savills considers it likely that part of this movement will indirectly reach the country. The increase in demand for industrial and logistics space in major European markets is expected to put pressure on other industries, encouraging their relocation to more competitive geographies.

Tiago Cortez, Industrial, Logistics & Data Centres Associate at Savills Portugal, notes: “Portugal is not currently a direct player in the defence sector, but it will certainly benefit from the spill-over effect this increase in demand will create in Europe. Growing demand in countries such as the UK, France, Germany or Spain will push other industries to seek alternatives. Portugal emerges as a natural destination, not only because of its strategic position on the Atlantic-Europe axis but also due to the energy competitiveness it currently offers. The result will be greater attractiveness of the country for industrial and logistics operations, reinforcing Portugal’s role as a production and distribution platform within Europe.”

The Case of the UK
In the UK market, Savills estimates that, by maintaining NATO’s target of 3.5% of GDP in defence, up to 3.0 million sq m of additional industrial and logistics demand could arise over the next seven years – the equivalent of an average annual absorption of 423,000 sq m. This volume is comparable to the annual space taken up by major high street retailers, representing around 13% of the country’s total absorption.

Andrew Blennerhassett, Associate Director, Industrial & Logistics Research team at Savills, adds: “The defence sector’s need for specialised industrial and logistics facilities poses a demanding real estate challenge. Unlike other commercial occupiers, defence organisations must deal with strict security protocols, geopolitical sensitivities, and highly specific infrastructure requirements, while simultaneously competing with fast-growing sectors such as e-commerce and manufacturing for limited available space. Ultimately, if there is one lesson to be learned from the pandemic, it is that diversified, resilient, and well-structured national logistics ecosystems are essential for the manufacturing industry – and defence is no exception. It will be up to international, national, and local decision-makers to acknowledge this reality and adopt a proactive strategy to ensure that land availability keeps pace with the industrial and logistics expansion ahead.”