Britain Needs Hundreds of New Warehouses as Defence Spending Soars

British warehouse construction is facing an unprecedented boom after the government pledged a major increase in defence spending, with property agent Savills estimating that an additional three million square metres of storage space will be required in the next seven years. This surge, driven by promises to boost the annual defence budget by around £40 billion by 2035, will create pressure throughout the logistics sector as the country enters what Prime Minister Keir Starmer describes as an era of radical uncertainty.

Much of the new spending is anticipated to reach UK-based arms manufacturers such as BAE Systems and Rolls Royce. These companies will be compelled to expand their production and storage capacities to fulfil larger orders both for the UK and its European allies. According to Savills, the necessary warehousing would cover more than 400 football pitches, with 429,000 square metres needing to be delivered annually through to 2032.

Historical figures reveal that, even before the current defence-driven demand, speculative warehousing construction in Britain averaged 825,000 square metres per year over the past decade. This figure excluded two exceptional post-pandemic years, with the average otherwise nearer 650,000 square metres per year. Recent global events have highlighted the crucial importance of resilient logistics systems, and defence requirements are now adding fresh momentum to this surge.

Andrew Blennerhassett, associate director in industrial and logistics research at Savills, underlined the importance of a coherent national response. Effective supply chains, he said, are indispensable for manufacturing, and defence operations are no exception. Policymakers at all levels will need to align land availability with the rapid expansion of industrial logistics.

Heightened competition for sites is already evident in soaring rents, particularly in strategic areas close to major transport links such as the M25. Prime warehouse rents have increased markedly since 2019, rising from £215 per square metre per annum to £398 per square metre. Companies have increasingly brought manufacturing and logistics operations closer to home in response to post-pandemic supply chain turbulence and rising costs.

Warehouse developers are beginning to capitalise on the anticipated long-term government demand. Sirius Real Estate, a leading UK and German warehouse owner, has recently appointed a former British Army major general as an adviser to secure advantage in the burgeoning defence sector. Chief executive Andrew Coombs described defence as a potential major growth driver for the market, noting that demand for logistics and manufacturing space is now largely government-backed.