Britain’s warehouse and logistics sector is facing a decade-defining challenge, as new analysis warns that defence spending will create unprecedented demand for additional storage and distribution capacity across the country.
According to research from Savills, the UK will require up to three million sq m of new warehouse space by 2032 to support the expansion of the nation’s defence manufacturing base. The figure, equivalent to more than 400 football pitches, highlights the scale of demand expected as government investment flows into the sector.
The forecast follows Prime Minister Sir Keir Starmer’s commitment to increase the UK’s annual defence budget by £40 billion by 2035. Major contractors such as BAE Systems and Rolls-Royce are preparing to expand operations to deliver on both domestic and allied commitments, creating a ripple effect through the wider warehouse and logistics market.
To meet demand, the UK would need to deliver an average of 429,000 sq m of additional warehouse space every year until 2032. This comes on top of the long-term annual average of 650,000 sq m, placing the sector under significant pressure at a time when development is already constrained by high construction costs, expensive financing, and limited land availability.
Prime warehouse rents are already on the rise, particularly in the South East. Around the M25, rents have nearly doubled since 2019, climbing from £215 per sq m to £398 per sq m in 2025. Analysts warn that defence sector expansion, combined with sustained e-commerce growth and reshoring strategies, could push rents higher still, placing further strain on occupiers across multiple industries.
Andrew Blennerhassett, associate director in Savills’ industrial and logistics research team, commented: “Defence investment has the potential to reshape the UK warehouse market in a very short period of time. Policymakers must ensure land supply and planning approvals keep pace with demand. Otherwise, capacity constraints will quickly become a brake on both industrial output and national resilience.”
The UK warehouse market has already seen major structural shifts since the pandemic, as manufacturers, retailers and distributors moved to secure greater domestic capacity. Defence now represents an additional layer of demand, with contractors and their supply chains expected to require new-build facilities, large-scale storage hubs, and modernised logistics parks.
Developers and investors are responding. Sirius Real Estate, which holds more than £2 billion of warehouse assets in the UK and Germany, has brought in a former British Army major general as a strategic adviser to help capture opportunities created by the expansion of the defence sector.
Andrew Coombs, chief executive of Sirius and a former Grenadier Guards officer, said: “Defence has the potential to become one of the most important drivers of demand for warehouse and logistics space over the next decade. These requirements will not only focus on capacity but also on quality, with an emphasis on resilience, efficiency and futureproofing. For landlords, the fact that much of this demand is ultimately government-backed adds a unique level of stability.”
The scale of investment expected from defence contractors is likely to reshape warehouse development patterns across the UK. Regions with established defence and aerospace industries, including the North West, South West and Midlands, are forecast to see the strongest uplift in demand, with ripple effects across national distribution networks.
However, analysts caution that unless the UK overcomes persistent barriers around planning and land availability, the challenge of creating sufficient warehouse capacity could become acute. With occupier expectations increasingly centred on ESG standards, energy efficiency and connectivity, there is also pressure on developers to deliver facilities that meet the sustainability benchmarks now standard in other sectors.
For warehouse and logistics operators, the convergence of defence spending, e-commerce demand and reshoring strategies is set to drive sustained competition for prime space. As the market prepares for what could be a transformative decade, the role of the warehouse sector in underpinning both economic growth and national security is likely to become more visible than ever before.
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