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The UK and its NATO allies are preparing for a new era in European defence and security.
Andrew Coombs
In June, NATO’s 32 members reaffirmed their ‘ironclad’ commitment to collective defence and agreed to spend 5% of GDP on defence and security, with at least 3.5% of that to be spent on core defence requirements, by 2035.
This is driven by an evolving situation in Europe. The ambitions of Russia, not just in Ukraine but towards the Baltic states, coupled with US president Donald Trump’s stance towards NATO, mean Europe, the UK and NATO can no longer rely on the US for defence to the same extent as in the past.
For decades, successive UK governments have consistently reduced defence spending, but it now seems inevitable the trend will reverse. The UK has already committed to the largest sustained increase in defence spending since the Cold War, with spending set to rise to 2.5% of GDP by 2027. While the precise numbers and speed are to be determined, the direction of travel has fundamentally changed.
This comes at a time when conflict has become more multi-dimensional and less conventional. A hundred years ago, there were just three dimensions to war: land, sea and air. With space and cyber now firmly established in modern warfare, we have at least five, with everything from our energy infrastructure and undersea cables to our banking system and social media potentially a battleground.
Europe, the UK and NATO can no longer rely on the US for defence to the same extent as in the past
One of the greatest examples of how warfare has changed has been the extensive use of drones by both Russia and Ukraine. That is already a reality in 2025, a decade away from NATO’s target.
We must therefore think about defence differently from 20 or 30 years ago.
If we need to defend ourselves in a multi-dimensional environment, we don’t just need more bombs and bullets; we need lots of different things, from drones and satellites to containers and logistics.
Increased defence spending will therefore mean increased manufacturing and innovation. The UK is particularly good at innovation, while Germany has a much bigger industrial base, but both require real estate to make, produce, store and distribute items for defence.
The UK’s Strategic Defence Review sets out five new ambitions – which, in addition to a NATO-first approach and being at war-fighting readiness, include making defence an ‘engine for growth’, with a new partnership with industry, ‘radical’ procurement reforms and backing for British firms.
The real estate requirement for defence is of course hard to predict, but if we make a broad assumption that up to 10% of the UK government’s extra spending goes on property costs, in just a few years that could reach close to £1bn in annual rents. That would happen in a market where there is already a shortage of industrial space.
As an owner and operator of industrial assets, we believe this is an interesting space, which is why we have appointed Angus Fay, a retired major-general and former director-general of global logistics operations at the Ministry of Defence, as a strategic adviser.
It remains to be seen the extent to which Sirius becomes involved in the defence sector, but given the influence it is bound to have on the industrial market and the economy, we are eager to understand more about it and the opportunities.
Andrew Coombs, chief executive, Sirius Real Estate