Megatrend Defense: Security as a New Driver of Real Estate Markets

How Rising Defense Expenditures Are Reshaping Europe’s Real Estate Markets

Since 2016, defense spending in Europe has more than doubled — a significant surge that is reshaping demand patterns and prompting new location strategies. Real estate assets are increasingly being assessed not only on economic fundamentals but also on security-related criteria.

Industrial and logistics properties are at the center of this shift. Manufacturing facilities in sectors such as automotive and mechanical engineering are being acquired or repurposed by defense companies. There is growing demand for sites with enhanced security features, tailored to the specific needs of suppliers and producers in the defense sector.

Office and research properties are also gaining importance, as R&D activities in the defense environment require specialized facilities, often with additional security infrastructure. This trend is driving demand beyond major metropolitan areas, particularly in smaller cities with universities or technology clusters.

On a local level, residential and retail markets are likewise benefiting. In regions with strong defense clusters, the growing workforce is creating increased housing demand. Meanwhile, local retail and hospitality sectors show comparatively resilient demand, supporting steady business activity — with positive spillover effects on the regional real estate market.

Security as a New Investment Criterion

‍
The megatrend Defense places a new factor at the center of investment decisions: security. ESG is evolving into ESSG. Real estate and infrastructure projects are no longer assessed solely on sustainability, social impact, and governance standards, but also on their security relevance. For investors, this means that security is becoming an integral part of risk and portfolio assessments.

Conclusion

‍
The growing focus on defense is driving demand for industrial, logistics, and research properties, influencing regional residential and retail markets, and expanding sustainability standards to include security as a key criterion. Those who integrate this development early into their location and investment strategies will gain a competitive advantage in an increasingly security-driven environment.