With the need to increase the UK’s defence capacity and capability remaining at the heart of the political debate, the latest report by Real Estate:UK, CoStar and Savills shows that despite defence-related occupier activity reaching 1.3 million square feet in the first half of 2026, the Government’s overall defence ambitions are at significant risk of being undermined unless there is an expansion of at least 14 million square feet of industrial and logistics space to support defence industrial complex by 2030.
The stark warning comes as the government grapples with not only raising the defence budget to meet the NATO commitment of 3% of GDP, but also in ensuring that the UK remains at the forefront of advanced defence technology and manufacturing capability, including the development and deployment of AI and drone production.
The report has been produced as the first in a series of market snapshots into key sectors of the UK economy and focuses on how the UK government’s defence push is already starting to shape industrial demand across the manufacturing, engineering and the broader defence supply chain. This has, according to CoStar data, put H1 2026 on course to rank among the strongest years for defence-related occupier activity of the past decade.
The most significant of which has been the Ministry of Defence’s 545,000 square foot DroneTEX facility in Swindon, which was the largest in H1 2026. This underpins the accelerating cluster expansion across established locations, including Derby, Plymouth, Swindon and South Wales.
While the publication of the Defence Investment Plan has provided greater clarity over future procurement priorities, as well as increased defence spending translating into demand for advanced manufacturing, secure logistics, office, R&D, storage and supply chain infrastructure.
However, for landlords and developers the key focus now is on overcoming the numerous barriers to rapidly being able to meet the demand requirement of 32 million square feet of space by 2033, which equates to 14 million square feet by the end of the decade. This is on top of an extra 2.6 million square feet of office and research and development space that may also be required to support up to 12,600 new as approximately 12,600 new administrative and technical research roles that could be created to support UK defence manufacturing.
These barriers include planning challenges, infrastructure capacity and connectivity, energy constraints including grid capacity, land supply especially to facilitate the expansion of existing clusters, and regional skills strategies.
In response, RE:UK is calling for the government to work closely with the real estate industry to remove some of these delivery challenges and work collaboratively in the development of national and local industrial strategies, especially in relation to defence and defence-related industry.
Commenting, Vanessa Hale, Chief Executive, Real Estate:UK, said:
“Despite the strong first half of this year, our analysis suggests that to meet the ambitions of the increased defence spending, then this requires an expansion of up to 14 million sq ft of additional UK industrial and logistics space by the end of this decade. Given the barriers currently being faced by developers and landlords to delivering this, including planning, land supply, grid connections and skills, then we would cite this as a significant risk to the government’s overall defence objectives and would call for a collaborative approach to help solve them.”
Grant Lonsdale, Senior Director of Market Analytics, CoStar Group, said:
“CoStar’s data highlights the scale of the potential for the real estate sector, with the first half of 2026 seeing some of the strongest defence-related activity for over a decade. For landlords and developers, the sector is becoming an increasingly important source of demand, helping to diversify occupier requirements beyond more traditional drivers such as e-commerce and third-party logistics.”
Robert Pearson, Director, Savills, said:
“The UK Government’s Defence Investment Plan should have significant knock-on effects on real estate, as increased defence spending translates into demand for advanced manufacturing, secure logistics, office, R&D, storage and supply chain infrastructure. Delivery of the Government’s military goals depends heavily on the availability of suitable physical space. Defence occupiers often need secure, power enabled, resilient and highly specialised facilities, with specific requirements around access, servicing, ownership, clearance and operational security.