The conflict in the Middle East shows how rapidly Europe's security landscape is accelerating, and with it, an urgency to support the industrial base that will enable it.

The UK's Strategic Defence Review makes the stakes concrete: up to 40% of defence equipment in modern land and aerial defence will be 'consumable', such as one-way drones. That is not a procurement challenge alone, it is a manufacturing challenge, demanding an always-on 24/7 industrial production capability. This is the essential backbone required to support and sustain the UK’s Modern Defence Strategy.

Defence-driven reindustrialisation is no longer a peripheral theme

This conviction has followed me through recent weeks of conversations within real estate, first with investors and analysts in the United States, then with the wider community at MIPIM in Cannes. In both settings, the central question had shifted. It is no longer where demand exists. It is who is positioned to meet it, as countries make long-term commitments to greater sovereignty and industrial self-reliance.

At Sirius, we manage over €4 billion of business parks across Germany and the UK, supporting manufacturers, logistics and storage businesses, with plans to invest a further €1 billion in defence-adjacent assets. Around 20% of our existing portfolio is already suited to defence-related activity, including former military logistics sites, facilities with heavy crane capacity and reinforced floor loading, and parks in established defence clusters. These include our Vantage Point site in Gloucestershire, adjacent to the local MOD footprint, and a new acquisition in Kiel, close to one of Germany's major naval bases and anchored by Rheinmetall, Europe's largest defence manufacturer.

This footprint gives us a direct view of what firms doing the real work on the ground actually need, and of how the industrial SME economy functions.

Defence space deficit

Nations are making long-term commitments to their own security and industrial capability, and the real estate implications are significant. Germany's debt brake decision could unlock up to €100 billion a year in defence spending. Our estimate is that for every €10 spent on defence, approximately €1 is required in supporting real estate: logistics, production, R&D, storage and training facilities.

In the UK, the direction of travel is clear, even if progress on defence fiscal policy is slower than many in the supply chain want. Smaller suppliers in particular are feeling the strain of uncertainty, with trade bodies reporting that businesses are finding it genuinely difficult to plan and invest while the wider framework takes shape. That tension is real and should not be understated.

The underlying industrial story is compelling.

The UK is the third-largest shipbuilder in the world, home to major exporters like BAE Systems and Rolls-Royce, with the supply chain supporting that capability well-primed to meet growing demand. The facilities that supply chain needs exist largely in accessible, flexible suburban estates, precisely the kind our UK BizSpace platform has operated for nearly two decades. At our Bedford Heights business park, for instance, 36 per cent of the site is let to tenants with a strong defence and military manufacturing focus.

In Germany, the transformation is already visible. Reported talks between Volkswagen and Rafael Advanced Defence Systems to convert a car plant into a defence production facility would represent one of the largest industrial conversions of its kind, a strategic redeployment of surplus automotive capacity at a moment when falling profits and overcapacity in the German automotive industry is reshaping the country's manufacturing base.

Stepping up for SMEs

The story that deserves more attention is what is happening among tier 2 and tier 3 businesses: the SMEs making ejector seat components in Bedford, laser targeting systems in Munich, drone storage solutions near major transport corridors. These businesses need space that is secure, discreet, adaptable and well-managed. Their equipment is specialised, their certifications are location-dependent, and once established, they rarely move. That is a fundamentally different tenancy profile from most of the commercial property market, and serving it well requires genuine specialist knowledge.

It is why we brought in retired Major General Angus Fay as Strategic Defence Adviser and why we’re so pleased to welcome the hugely experienced Ian Watson to our Board. . Between them, they bring decades of experience in defence operations and European industrial property investment. It also underscores how much operational stability matters to a defence SME when external conditions are uncertain. Businesses best placed to endure and respond quickly are those with flexible, well-managed premises and room to scale without friction. A good real estate partner cannot close a policy gap, but it can meaningfully reduce the burden of operating through one.

Industrial real estate has always been the unsung infrastructure of a functioning economy. It is now becoming the infrastructure of a more resilient Europe. We see our role as helping make national commitments deliverable, for the businesses doing the essential work on the ground.

Find more about the Sirius Real Estate portfolio in Germany and the UK