Britain’s defence boom is finding an unexpected home in the city
As governments have ramped up military spending in response to the war in Ukraine, Britain’s commercial property market is discovering an unexpected source of demand: defence technology
For decades, the shape of London’s office market was tied to the golden triangle of financial institutions, legal services and life sciences. But, as Europe enters a new era of military rearmament in the face of prolonged turbulence in Ukraine, another industry is beginning to alter that landscape, defence.
The changing face of Canary Wharf
Canary Wharf, once synonymous with global banking, is emerging as the unlikely destination for companies involved in drone technology, cybersecurity and artificial intelligence. And, according to Reuters, property investors in the area are increasingly targeting defence businesses as rising military expenditure is pressing demand for specialised workplaces or R&D facilities.
An example of this can be found at 17 Columbus Courtyard in Canary Wharf. Developer LS Estates is currently investing more than £100 million into refurbishing the former office building, initially targeting a life-science occupier for the move. However, with demand from that sector weaker than anticipated, defence and AI businesses have emerged as the alternate target-market, LS Estates CEO Mark Swetman told Reuters. With reinforced floors, backup power and advanced ventilation, the premises caters for occupiers requiring more specialist framework.
The new age of defence
The shift lies in tow with the broader transformation of modern warfare. Defence is no longer confined to weapons production in large outer-city industrial complexes; autonomous systems, digital surveillance and drone development increasingly depend on software engineers, scientists and specialist researchers. For companies competing for top-talent, proximately to the London-Oxford-Cambridge corridor has become just as paramount as access to traditional defence infrastructure.
Savills estimates that Europe’s rising defence requirements could generate demand for 37 million sqm of space over the next seven years. For Britain alone, this could include 3 million sqm of additional office and research space. Defence components manufacturer Isembard has just opened a major factory in Southwark, the largest in the city since World War II; while the Ministry of Defence has established Europe’s biggest indoor drone-testing facility in Swindon, just an hour outside of London.
Profits amist uncertainty
The investment case for the industry, however, sits on the shoulders of geopolitical anxiety. Defence projects usually involve lengthy procurement processes, rigorous security checks and uncertainty over future contracts or general demand. Moreover, investors usually have to consider whether specialised developments can pivot into more generic commercial property, if demand changes.
Ultimately, the defence boom illustrates how quickly geopolitical tension can reshape markets, including those far removed from any physical battlefield. But, whether it becomes a lasting source of economic growth resides on the wider sustainability of prolonged defence budgets, contracts and jobs.
