The defence supply chain – where will property demand emerge?

From factories and secure storage facilities to laboratories, testing space and innovation campuses, growth in the UK defence supply chain will bring a diverse range of property requirements.

With £298 billion committed through the Defence Investment Plan and almost 60,000 new industry jobs expected by 2030, the scale of investment is significant, and increasingly visible on the ground.

Alongside this, the Defence Industrial Strategy aims to make the UK one of the world’s most competitive environments for defence‑sector growth. Its priorities, which include backing domestic suppliers, accelerating innovation and expanding productive capacity, point to a future in which defence‑related businesses will need more space, more power and more specialist facilities.

But where will that demand emerge, and what kind of property will the supply chain require?

According to James Lacey, Head of Public Sector Property at Vail Williams, the answer will be more varied and more geographically dispersed than many expect.

How UK defence investment will drive property demand

Of course, defence investment does not immediately translate into new factories. Suppliers need confidence in procurement pipelines, contract duration and future order volumes before committing to long leases or capital expenditure. Smaller businesses, in particular, will wait for contract certainty.

Even so, the direction of travel is unmistakable. The UK is rebuilding sovereign manufacturing capacity, strengthening supply‑chain resilience and accelerating development in drones, autonomous systems, cyber and other advanced technologies. As these programmes scale, several layers of property demand will follow.

What type of property does a defence supplier need?

High‑quality industrial and advanced manufacturing space will dominate demand, but requirements will vary widely.

Many defence suppliers will need buildings with higher power capacity, enhanced security, controlled access and generous yard space. Specialist manufacturing may require reinforced floors, greater eaves heights, clean rooms, testing areas, extraction systems or separation between research, production and storage.

Cyber, AI, robotics and autonomous systems businesses may favour innovation campuses and science parks where laboratories, offices and light manufacturing sit alongside universities and collaborative research.

Location criteria will also be more complex than motorway access. Businesses may need proximity to ports, airfields, military bases, test environments, major contractors or specialist supply-chain partners. Secure digital connectivity and reliable energy infrastructure will also be as important as transport links.

Access to specialist skills can be equally decisive. Projects focused on software, cyber, artificial intelligence and R&D may gravitate towards the South East and locations close to major airport hubs, universities and established technology clusters. Meanwhile, manufacturing requirements could be better served by locations in the North, Midlands or other regions with established engineering, aerospace and advanced manufacturing workforces already exist.

For more sensitive uses, planning, environmental, safety and security requirements can further narrow the pool of suitable sites.

That is why defence sector property location strategy needs to consider the building, infrastructure, workforce and wider estate together. Early engagement with planning authorities, utilities providers and defence stakeholders is essential as part of this process.

Understanding specialist defence property requirements

Defence real estate requirements extend beyond the physical specification of a building. Defence-related transactions can involve complex security, confidentiality and compliance provisions which affect how a property is selected, occupied and managed.

At Vail Williams, we have first-hand experience of navigating these issues. We supported the procurement of land and buildings for the Global Combat Air Programme, the international collaboration between the UK, Italy and Japan to develop the next generation of combat aircraft, on behalf of BAE Systems.

Our role included identifying locations capable of meeting the programme’s operational and workforce requirements, sourcing suitable properties and negotiating lease terms which reflected the security and compliance obligations of an internationally significant defence programme. Access to technology skills, transport connections and international air travel formed an important part of the location strategy.

Depending on the nature and international reach of a programme, property agreements need to reflect applicable sanctions and export-control requirements. These can include restrictions associated with the UK Sanctions List, United Nations designations and US export-control lists, such as the Bureau of Industry and Security’s Denied Persons List.

This requires an understanding not only of the occupier’s technical requirements, but also of the implications for landlords and investors.

By engaging with both parties, we can explain why particular protections are necessary, identify areas where proportionate compromise may be possible, and help translate complex operational requirements into workable property terms.

Defence property considerations for occupiers and suppliers

For companies considering expansion, property strategy must align with operational and procurement planning. Businesses need to understand how much space they require now, how quickly that requirement could change and whether a building can accommodate future production methods.

Flexibility will be particularly important for SMEs whose growth may hinge on individual contract awards.

Detailed assessments of power, security, servicing, planning and workforce accessibility should take place before terms are agreed. A conventional industrial building may appear suitable but prove expensive or impractical to adapt.

Occupiers should also consider whether leasing, purchasing or commissioning a purpose‑built facility best reflects their funding position and contract pipeline.

The balance of requirements will differ according to the occupier and the nature of the programme. A public sector occupier may require protections driven by statutory, national security and policy obligations. Meanwhile, a private defence contractor might have different obligations, but will still need to meet minimum security and confidentiality requirements arising from the contracts it is delivering.

Defence property opportunities for developers, investors and landowners

Defence‑led growth could unlock sites in markets that have historically attracted limited speculative development. Land close to defence employers, research centres and transport infrastructure may become increasingly valuable, but development must be grounded in evidence of occupier demand, not headlines.

Defence occupiers and contractors can offer an attractive proposition for landlords and investors.

The long-term nature of many defence programmes means that occupiers may be able to commit to leases of 10, 15 or even 20 years, providing greater income security and potentially supporting investment value.

“However, that benefit must be considered alongside lease terms which may be more onerous than those typically required by a conventional commercial occupier. Understanding the operational reasons behind those provisions – and where a proportionate compromise can be reached – is critical to getting transactions over the line,” added Guy.

Depending on the defence sector occupier and the sensitivity of its work, negotiations might address:

• Restrictions on selling or leasing other parts of an estate to sanctioned, embargoed or otherwise prohibited parties.
• Rights for the defence occupier to terminate its lease following a defined security event.
• Restrictions on overflying the property, including the use of drones or other unmanned aircraft.
• Access to, or control over, CCTV cameras covering the property.
• Longer notice periods for landlord access.
• Rights to restrict particular people from entering sensitive areas.
• Controls governing the landlord’s contractors, managing agents and other third parties.

Provisions like these can affect the management, marketability and investment value of the wider estate. They therefore need to be identified and considered before terms are agreed, rather than treated as a legal detail towards the end of the transaction.

This is where public‑private partnerships may become increasingly important. Local authorities and government bodies can assemble land, improve infrastructure and support skills development, while private capital delivers the facilities required.

Planning for long-term defence sector growth

The defence supply chain opportunity extends beyond individual factories. Large‑scale investment places pressure on housing, transport, utilities and local services. In areas where skilled workers are already scarce, employment growth must be matched by investment in homes, education and connectivity.

James commented: “Defence investment will not create a single wave of uniform property demand. Requirements will differ significantly depending on whether a business is manufacturing components, developing autonomous technology or supporting a major contractor.

“The opportunity for the property market lies in understanding those operational requirements early and identifying locations where buildings, infrastructure and skills can come together.”

This calls for a strategic, multidisciplinary approach from the outset.

For occupiers, the priority is securing property that supports growth without creating unnecessary cost or inflexibility. For landowners and developers, it is identifying sites capable of meeting specialist demand. For investors, it is understanding the operational and contractual risks behind an increasingly attractive sector.

The Government’s ambition to make defence an engine of economic growth is beginning to translate into new facilities, regional investment and supply‑chain expansion. The property market now has a central role in converting that ambition into deliverable space.

Those who identify the right locations, understand the sector’s technical requirements and plan early will be best placed to benefit from the next phase of UK defence investment.

How Vail Williams can support defence property decisions

Vail Williams advises defence occupiers, developers, investors and landowners across the industrial and advanced manufacturing property markets. Our multidisciplinary teams provide industrial agency, planning and development, valuation and investment advice to help clients assess opportunities, manage risk and make informed defence property decisions. To discuss a defence property requirement or development opportunity, contact James Lacey and our defence sector property team.

Our experience includes supporting property procurement for internationally significant defence programmes and negotiating transactions involving specialist security, confidentiality, access and compliance requirements.

By understanding the needs of both occupiers and property owners, we can help clients identify suitable locations and buildings, communicate specialist requirements clearly and negotiate commercially workable terms.

In November, we will also be part of the defence sector panel discussion at the South Coast CPS alongside Dorset Innovation Park, McLaughlin & Harvey and Solent Freeport. We hope to see you there.