LOGIC: Logistics Sector Update - Autumn 2025
The UK's Evolving Infrastructure and Logistics Demands in the Defence Sector
By Antony Vundi
The landscape of defence spending across NATO member nations is entering a period of profound transformation. While immediate sweeping changes are not expected, geo-political tensions and the US taking a step back from its international peacekeeping role means that a steady and significant rise in expenditure is on the horizon.
Strategic Defence Review: The UK’s Pivotal Role
The primary challenge for the UK has been to strike a strategic balance between bolstering its own defence capabilities, particularly to meet the scale of munitions production required for modern high-tempo conflicts, while maintaining its ongoing support to Ukraine and for other existing defence commitments.
Whilst it has been well documented that the UK has a low supply of key weapons and munitions, the positive side of the story is that the UK stands out as a key player in advanced aerospace and shipbuilding, with regional hotspots emerging in response to both domestic and international security demands. The UK has most recently secured a £10 billion deal to supply the Norwegian navy with at least five new Type 26 frigates in what the Ministry of Defence described as the UK's "biggest ever warship export deal by value", with the possibility of similar deals with Sweden and Denmark in the near future. This growth is driving a renewed focus on workforce training, planning reform, and perhaps most of all, the development of robust logistics infrastructure.
Following its strategic defence review, the UK is poised for its largest sustained increase in defence spending since the Cold War. NATO’s plan targets a 3.5% allocation of GDP to military expenditure, with an additional 1.5% earmarked for cyber and other emerging domains. To put this in perspective, the annual increase alone matches the entire cost of the HS2 rail project, underscoring a commitment to national mobilisation and war-fighting readiness. The UK aims to reach a 2.5% spending target by 2027, while maintaining a strategy that is firmly NATO-centric.
Infrastructure and Location: Meeting New Demands
If the UK’s defence spending reaches NATO’s 3.5% of GDP target, demand for additional logistics space could soar to 192,000 square metres annually (an annual uplift of 92,000 square metres), while defence logistics employment is projected to rise by nearly 17,000 jobs.
Driven by spurring new entrants, partnerships with tech firms, and M&A activity, particularly in the drone sector, the defence logistics sector increasingly demands modern and AI-enabled production facilities. Existing buildings are often inadequate for this rapid technological evolution, necessitating bespoke, built-to-suit structures with enhanced security features such as CCTV, blast-proofing, and custom designs to meet the stringent NATO standards.
UK Defence Demand: Real Estate Pressures
Driven by increased spending from Eastern and Central Europe—especially Poland—UK defence-related demand could be required to grow up to 3 million square metres annually, to enhance the nation’s export capabilities. However, this expansion will inevitably put significant pressure on both the UK’s land availability and the planning approvals process. As with other sectors competing for key logistics locations, a non-negotiable consideration for all new and expanding facilities is access to reliable utilities, including 24/7 power and water supply.
This will likely necessitate direct government intervention to accelerate local planning processes and grid reform as well as providing support for workforce training and supply chain development. The theme then is very similar to other sectors which need to grow quickly to ensure the UK remains a global leader. It’s clear that defence will need to take an ever-increasing role in the industrial strategy and where possible needs to be driven in parallel to data centre construction and use of renewables.
Adherence to NATO building standards and bespoke client requirements is essential and will provide a unique challenge for developers moving into the defence logistics space. A further complication for the defence industry developers in their search for strategic locations will be competition for port proximity with e-commerce giants, who can very often move much quicker, present a known quantity for existing operators and are willing to pay premiums for space.
Another key consideration for entrants into the market will be navigating the ESG concerns of investors and landlords. At present it remains unclear how the “S” in ESG will fit around investment in military infrastructure during a time of national military build-up and renewal.
The Path Forward: Clustering, Uncertainty, and Investment
Defence occupiers increasingly prefer clustering as significant political and financial investment is required to develop new hubs. The development of new clusters is almost certainly a long-term project for any local authority, necessitating the retraining of local workforces and partnering with existing developers in the military logistics space. Though upfront costs and regulatory hurdles remain significant barriers, security imperatives are likely to drive at least some movement toward new cluster development.
The bespoke nature of the units required means developers are unlikely to build on a speculative basis and so long-term certainty and clarity is going to be key for developers and operators likely to make the upfront investment.
The UK’s defence sector is on the cusp of a major transformation, driven by increased spending, evolving threats, and the need for modern infrastructure. Success will depend on strategic planning, government support, and the ability to adapt to a rapidly changing global security environment. As the sector expands, the challenge will be to balance growth with resilience, innovation, and the imperative to remain at the forefront of NATO’s collective defence.
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