Defense Real Estate investments explode in Europe

The accelerated growth of NATO military spending has triggered an unexpected economic phenomenon: the transformation of former industrial zones or abandoned military lands into real gold mines for investors, with the respective properties becoming a new premium asset class, according to an article published by the German news site Klamm.

According to the cited source, the expansion of the armament programs of the member states, led by Germany, has ignited a new real estate fever that is rewriting the rules of the market. A study conducted by the real estate consulting company Savills shows that in Germany alone, over six million square meters of additional space would be needed, intended for military logistics, ammunition storage and equipment maintenance. This is an increase of 17% compared to the current surface area.

At the European level, the additional demand would amount to 37 million square meters, according to the same study, a volume comparable to a new economic sector in formation. Roberto Crapanzano, an expert at JLL, told the cited source that "we are seeing price increases of between 15% and 30% for land suitable for security uses”. Demand far exceeds supply, and each new arms contract pushes prices higher and higher.

What was once a niche in the real estate market has turned into a billion-euro segment: the so-called "Defense Real Estate”. This area of interest is where private investors, public institutions and geopolitical strategies meet.

After NATO decided in June to increase defense budgets to 3.5% of GDP, an unprecedented wave of investment followed across Europe, and now properties in sparsely populated areas, but efficiently connected to road or rail infrastructure, are particularly sought after, places that offer both isolation and quick access to logistics.

"The market has changed radically in just a few months. What previously did not find buyers is now an absolute rarity,” says Christian Kah, an analyst at Colliers, for Klamm.

The expansion of the arms industry is reflected in concrete projects of historic proportions. The giant Rheinmetall is building the largest ammunition factory in Europe in Germany, the company Hensoldt is expanding its capacities in Ulm, and the company MBDA in Schrobenhausen. The Bundeswehr (German army) also needs new land for barracks, warehouses and future repair centers.

The source cited specifies that the Ministry of Defense in Berlin completed 450 construction projects last year, an increase of 20% compared to the previous year, investing around 1.6 billion euros in military infrastructure, with the goal of increasing investments by up to 20% annually.

But security comes at a price. Only a small part of the available land meets the strict standards imposed by modern military construction. "Access control, surveillance systems, reinforced walls and special building regulations are driving up costs considerably,” said Roberto Crapanzano.

In many cases, old barracks or warehouses were sold or converted into housing after Germany suspended compulsory military service in 2011. Around 150 of the 400 military bases have been converted to civilian use, forcing the state to turn to new, more expensive construction. "Due to land prices, the state will increasingly have to resort to rental models with private investors,” estimates Christian Kah of Colliers.

International funds, on the other hand, are not waiting any longer. They are already acting aggressively, preparing funds dedicated to "special properties” - warehouses, maintenance centers and buildings designed exclusively for military use. Many of these developments are built to suit the needs of the future occupant, usually a weapons company or a public institution. The returns are attractive, exceeding the level of the traditional commercial real estate market, thanks to long-term contracts and payment guarantees offered by solvent tenants, often the state itself.

However, this new rush for profit has hard limits. Safe, well-located and easily accessible land remains scarce. Specialists are already observing how German companies migrate to Poland, the Czech Republic or Hungary, where costs and bureaucracy are lower.

Thus, the European real estate market is going through a real turning point. In an increasingly uncertain world, security is becoming the new supreme criterion for investment. Yield, connectivity and energy efficiency, once the pillars of decision-making, are giving way to the fundamental question: can this place house tanks, drones or missiles? In an economy born of peace, infrastructure is now adapting to the needs of deterrence, and demand shows no signs of abating. As long as the reality remains a constant, defense real estate will continue to be the fertile ground of the new European strategic economy, a market in which security is no longer just a priority, but the very currency of the future.