LOGIC: Logistics Sector Update - Spring 2026
The Changing Landscape of UK Defence Real Estate
By Antony Vundi & Mark White
LOGIC: Logistics Sector Update - Spring 2026
The Changing Landscape of UK Defence Real Estate
By Antony Vundi & Mark White
Since the publication of our previous LOGIC newsletter, the UK defence logistics real estate sector has continued to face up to new challenges. The government's Strategic Defence Review, published in June 2025, has now moved into the implementation phase, with tangible implications for landlords, occupiers and developers in the defence related logistics sector. As defence spending accelerates, demand for secure warehousing, distribution centres, and munitions storage facilities is continuing to carve out a distinct asset class within the industrial property market.
Geopolitical Instability and Nearshoring
Rising global threats—including fears surrounding Trump's refusal to guarantee Article 5 commitments and threats to annex Greenland from NATO ally Denmark—have accelerated European focus on independent defence capabilities. The UK, as Europe's largest defence spender, now occupies a critical coordinating role in continental defence logistics networks. This instability is reinforcing the trend towards nearshoring, which is reshaping demand patterns across the industrial property sector. The Defence Industrial Strategy, published in September 2025, explicitly prioritises "onshoring the necessary industrial capabilities" for sovereign national security. The Strategy announces new Defence Growth Deals in Plymouth and South Yorkshire, with further deals planned for Scotland, Wales, and Northern Ireland. For defence logistics operators, these regional clusters present significant opportunities; developers who can assemble strategic land positions near emerging defence hubs are well placed to capture long-term, government-backed demand. A recent Capgemini survey supports this analysis, finding that the share of companies investing in nearshoring has risen from 42% in 2024 to 56% in 2025. Nevertheless, challenges remain. EY-Parthenon analysis indicates that defence programmes now account for 41% of unfunded projects, up from 16% a year ago. Competition from major online retailers for prime logistics real estate compounds these pressures.
Market Example: South Yorkshire Defence Logistics Cluster
The emerging South Yorkshire defence cluster offers a notable example of these trends in practice. Anchored by BAE Systems' new artillery manufacturing facility in Sheffield—part of the South Yorkshire Defence Growth Deal— the development leverages the region's heritage in precision metal manufacturing, alongside Sheffield Forgemasters and the University of Sheffield's Advanced Manufacturing Research Centre. For logistics landlords, the implications extend beyond the manufacturing footprint itself. The cluster will require supporting warehousing for component storage, secure distribution facilities, and logistics hubs capable of handling sensitive military equipment. Developers with existing industrial holdings in the region should consider retrofitting assets to meet defence security specifications, while those with development land may find pre-let opportunities with defence supply chain occupiers seeking proximity to the primary manufacturing anchor.
Image credit: Bae Systems
Security Specifications for Logistics Facilities
A growing but often overlooked consideration for defence logistics occupiers is anti-protest security. Palestine Action, proscribed as a terrorist organisation in July 2025, has targeted defence logistics facilities, including breaching RAF Brize Norton and forcing Elbit Systems to close its Bristol facility after sustained attacks causing millions in losses. Operators now require enhanced perimeter security and secure access controls, adding cost and complexity to specifications. Lease negotiations will need to address responsibility for security infrastructure installation, ongoing maintenance obligations, and the treatment of such works upon lease expiry. The cost premium for these specifications—estimated at 15–25% above standard logistics builds—must be factored into both development appraisals and rental expectations.
Landlord Reporting and Compliance Considerations
Landlords should also consider whether involvement in defence logistics may bring them within the defence supply chain, triggering regulatory obligations under several frameworks. Amongst the most pertinent would be the National Security and Investment Act (NSI) 2021, which may apply to acquisitions of land proximate to sensitive defence sites or used in connection with defence activities. Likewise, the forthcoming Cyber Security and Resilience Bill may impose obligations on landlords providing managed services to defence tenants, such as IT infrastructure or building management systems. Lease negotiations should therefore address landlord cooperation obligations, including provisions for information sharing regarding supply chain due diligence, notification of ownership changes that might trigger NSI Act review, compliance with modern slavery reporting requirements, cooperation with government audits, and management of security clearance requirements for landlord personnel with access to secure areas.
Conclusion
For logistics operators, the message is clear: defence logistics requires lease structures that accommodate government contracting complexities. Those who can navigate these requirements will be well-positioned to capture what promises to be a generational investment cycle in UK defence logistics infrastructure.
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