• Defense sector manufacturers have announced nearly 200 facility investments across Europe since 2024.
• The United Kingdom, Germany and France account for the highest levels of productive investment.
• More than half of the investments are for new facilities.
• The next wave of demand is expected to extend to companies across the entire defense supply chain.
A wave of defense investment worth hundreds of billions of euros is reshaping the European industrial real estate market, according to a new study by Cushman & Wakefield.
The consultancy’s analysis, presented in its latest report, Future Flows: Global Dynamics & European Industrial Real Estate, identified 197 facility openings and defense-related manufacturing investment announcements across Europe since the beginning of 2024. This represents one of the clearest signs to date that rising defense spending is translating into demand for industrial real estate.
More than half of the investments relate to new facilities (54%). Of this total, 36% are greenfield developments, while 17% involve the acquisition, leasing, or conversion of existing buildings. The remaining 46% relate to the expansion of existing industrial facilities.
The United Kingdom, Germany, and France account for the highest number of new investments, reflecting their position as Europe’s largest defense manufacturing markets. Significant activity has also been recorded in Spain, Italy, Sweden, Turkey, Belgium, and the Netherlands. Meanwhile, Central and Eastern Europe, led by Poland, has emerged as a major investment destination, particularly for artillery, ammunition, and other defense production capabilities.
Although Portugal represents only a small share of the European analysis in Future Flows, developments in the domestic market point in the same direction. Increased defense investment is already driving new industrial projects, such as the revitalization of the Arsenal do Alfeite, which will strengthen Portugal’s naval maintenance and modernization capabilities, and the future drone manufacturing facility announced by Keydef and Flying Wedge Defence and Aerospace, which aims to use Portugal as a production platform for European and NATO markets. These projects illustrate how Europe’s growing commitment to defense can also create new opportunities for Portugal’s industrial and logistics sectors.
Investment in defense manufacturing is being driven by the significant increase in spending by European governments in response to the need to strengthen defense capabilities. At the same time, there is a strong push to source products and materials within Europe, reinforcing regional autonomy, supply chain resilience, and economic growth. Recent procurement commitments, some on a scale not seen in Europe for decades, have substantially increased manufacturers’ order books, particularly among prime contractors and Tier 1 suppliers.
According to the study, the most common requirement is for facilities ranging from 10,000 sq m to 25,000 sq m, with the average size of new facilities standing at approximately 20,000 sq m. While some occupiers require specific security features or operational adaptations, many are occupying conventional industrial facilities and adapting them for defense production.
Sérgio Nunes, Head of Industrial & Logistics at Cushman & Wakefield in Portugal, commented: "Although some defense-related activities require specialized facilities, a large portion of demand can be accommodated within conventional industrial and logistics assets, creating opportunities for both new developments and the refurbishment and repositioning of existing spaces. In Portugal, this could become a new source of demand for the industrial and logistics sector, with the potential to attract investment and generate skilled employment."
As major defense procurement programs move into production, activity is expected to spread across other tiers of the supply chain. Cushman & Wakefield expects smaller suppliers to increase investment in production capacity and industrial space, creating additional demand beyond the sector’s major contractors. This opportunity may be particularly relevant in defense markets characterized by small and medium-sized enterprises, such as Italy, Spain, and the Netherlands, where supply chains are less concentrated among large corporations.
With European Union defense spending projected to rise from €419 billion in 2025 to €547 billion in 2029, and defense equipment expenditure between 2026 and 2029 expected to exceed the total recorded during the previous decade, Cushman & Wakefield believes that demand for industrial and manufacturing space linked to the defense sector will remain a long-term structural growth trend within Europe’s industrial and logistics real estate market.
