Defence-related occupier activity reached 1.3 million square feet in the first half of 2026, reflecting growing demand from manufacturing, engineering and the broader defence supply chain, according to a newly released market spotlight from CoStar Group, Real Estate:UK and Savills.
However, the report says barriers around planning, infrastructure, grid capacity, land supply and skills could constrain the sector's ability to accommodate growth and deliver the space needed to support the UK's long-term defence ambitions.
A key commitment was the Ministry of Defence's 545,000-square-foot DroneTEX facility in Swindon, although demand extended beyond government requirements and included a broad range of businesses across the defence sector. Activity was concentrated in established defence and aerospace hubs including Derby, Plymouth, Swindon and South Wales.
The findings come as the UK government seeks to increase defence spending and deliver the priorities outlined in its Defence Investment Plan, which industry participants expect will support additional manufacturing and supply chain activity.
While defence-related demand still represents a relatively small share of overall industrial take-up, the spotlight suggests the sector could become a more significant driver of future occupier requirements.
Savills' analysis indicates that increased defence spending could generate up to 3 million square metres of additional industrial and logistics demand over the next seven years, alongside approximately 243,000 square metres of office and research and development space. Those requirements could support around 12,600 new administrative and technical research roles linked to UK defence manufacturing.
Grant Lonsdale, senior director of market analytics at CoStar Group, said: "CoStar’s data highlights the scale of the opportunity for the real estate sector. Following record defence-related occupier activity in 2025, momentum has continued into 2026, putting this year on course to rank among the strongest of the past decade. For landlords and developers, the sector is becoming an increasingly important source of demand, helping to diversify occupier requirements beyond more traditional drivers such as e-commerce and third-party logistics."
Robert Pearson, director at Savills, said: "The UK government’s Defence Investment Plan should have significant knock-on effects on real estate, as increased defence spending translates into demand for advanced manufacturing, secure logistics, office, R&D, storage and supply chain infrastructure. Delivery of the government’s military goals depends heavily on the availability of suitable physical space. Defence occupiers often need secure, power enabled, resilient and highly specialised facilities, with specific requirements around access, servicing, ownership, clearance and operational security."
Vanessa Hale, chief executive of Real Estate:UK, said: "Our analysis suggests that to meet the ambitions of increased defence spending, this requires an expansion of up to 3 million square metres of additional UK industrial and logistics space over seven years. However, this expansion may be at risk unless barriers relating to planning, infrastructure, grid capacity, land supply, and regional skills strategies are urgently addressed. With the overall success of the government’s defence ambitions resting upon whether the UK can provide the buildings, land and enabling infrastructure needed to support a more resilient domestic defence supply chain. Real Estate:UK calls on ministers to work closely with us to help remove barriers to more take up, which means more jobs, modern workplaces and a safer realm."
The CoStar and Real Estate:UK Market Spotlight can be read here.