The Government's Defence Investment Plan, published this summer, represents one of the most significant shifts in UK defence spending in a generation. Backed by £298 billion of investment over the next four years and built on the vision of the Strategic Defence Review ('SDR'), the plan signals a decisive move toward "warfighting readiness". This briefing examines what that may mean for the UK's real estate sector.
1. Industrial
The SDR committed to the construction of at least six new energetics and munitions factories in the UK. They are intended to provide an “always-on” domestic production capacity for key weapon components: propellants, military explosives and pyrotechnics. More than 1,000 manufacturing jobs are envisaged. Specific final locations have not been confirmed, though potential sites include Grangemouth (Scotland), Teesside (north-east England), and Milford Haven (Wales).
2. Logistics
The increased volume of defence manufacturing will need a range of specialist facilities to support it, such as research laboratories, logistics hubs and data centres. There will also be an increase in warehouse demand to accompany the increased volume of manufacturing military equipment as well as an accompanying demand for warehouse space from logistics operators servicing the sector. A recent report by Real Estate:UK, CoStar and Savills states that to realise the Government’s defence ambitions, an expansion of at least 14 million square feet of industrial and logistics space is needed by 2030.
3. Offices
The increased defence budget will lead to an indirect demand for more office space, particularly secure, digitally resilient offices, for defence-tech firms, systems integrators, engineering/design teams, cyber and AI businesses, and the expanding defence supply chain. Reports suggest that an extra 2.6 million square feet of office and research and development space is required to support the 12,600 new administrative and technical research roles that could be created to support UK defence manufacturing.
4. Services housing
The Defence Housing Strategy commits roughly £9 billion over ten years to improve service accommodation. The central target is to modernise, substantially refurbish, renew or rebuild more than 40,000 Service Family Accommodation homes, around 14,000 of which will receive major refurbishment or replacement/ modernisation, offering opportunities for the construction sector.
"It is great to see the UK taking steps to invest in defence assets and capability. Investment into defence real estate will however be in competition with the significant power, water and planning demands of data centres and new housing which sit alongside defence assets as strategic infrastructure that the UK desperately needs. Private real estate investors will need to see a clear path on how the demands for resources and other planning challenges are to be addressed to de-risk their returns to investable levels at scale."
Sarah Walker
