UK Landlords Eye Defence Firms for Office Space Amid Rising Demand
Defence Sector Drives New Demand in UK Commercial Real Estate
By Iain Withers
LONDON, Sept 30 (Reuters) - Property investors in Britain are targeting defence clients to capitalise on growing spending on rearmament, including to occupy former bank offices in London's Canary Wharf financial district, real estate companies have told Reuters.
Growth in Defence Technology and Office Demand
A boom in defence technology — from drone programming to AI-enhanced cybersecurity — is stimulating demand for city centre offices and laboratories, on top of interest in traditional out-of-town industrial sites, the companies said.
"Defence used to be all about munitions, but that's totally changed. Now it's about these new technologies," said Jennifer Townsend, a partner at Knight Frank, adding defence firms increasingly wanted to be near British research universities to attract talent.
European Defence Spending and Space Requirements
European countries are ramping up defence spending to meet tougher NATO targets, creating demand for 37 million square metres over 7 years — equivalent to roughly 5,200 soccer pitches — Savills estimates.
In Britain, up to 3 million square metres of industrial and logistics demand will be needed, plus nearly 250,000 square metres of additional office and research and development space, Savills forecasts. The latter is only about 2-1/2 times the space in HSBC's soon-to-be vacated Canary Wharf skyscraper, but a boost for a sector recovering as companies limit home working.
The 'Golden Triangle' Research Cluster
The 'Golden Triangle' research cluster between London, Cambridge and Oxford is one of the areas benefiting, according to property agencies.
Canary Wharf Estate Seen as Secure
CANARY WHARF ESTATE SEEN AS SECURE
Defence and AI Firms Target Refurbished Offices
In Canary Wharf — once dominated by banks — developer LS Estates told Reuters it was sounding out defence and AI companies to occupy a refurbished nine-floor office once home to Credit Suisse support staff in response to changing demand.
One of Britain's largest industrial landlords, Tritax Big Box, separately told Reuters it has identified defence as a potential growth sector and begun sounding out potential occupiers.
"There is sadly a significant boom in defence. The consequence is there's an awful lot of money being spent in R&D," LS Estates CEO Mark Swetman said, adding that the managed Canary Wharf estate with its own security staff would likely be appealing to prospective defence occupiers.
Laboratory Space and Shifting Interest
The £100 million-plus ($130 million-plus) refit of 17 Columbus Courtyard — backed by Singapore's sovereign wealth fund GIC and Oaktree — was originally targeted at life sciences firms with up to 60% of the space earmarked for laboratories, but Swetman said interest from that sector had been lower than expected in the short term.
The high-spec space featuring reinforced floors, access to backup power and advanced ventilation is now seen as a potential fit for defence and AI firms, Swetman said.
Security and Location Preferences for Defence Occupiers
Surging demand from defence occupiers means offices need tighter security and resilience, while some firms were targeting space in Westminster to be close to political decision makers, said Julian Woolgar, a partner at Knight Frank.
Recent Developments and Industry Clustering
Major Openings and Facility Investments
Earlier this month, defence components maker Isembard opened what it said was London's largest factory since World War Two in the city's Southwark district.
The Ministry of Defence meanwhile recently opened the largest indoor drone testing facility in Europe in a Panattoni-developed warehouse in Swindon. One of the world's largest privately owned developers of industrial real estate, Panattoni said it was in active discussions with defence companies for space nearby as it redevelops a former Honda car plant.
Clustering of Defence Suppliers
"Suppliers to the MoD like to cluster, like the Formula One cluster in Oxfordshire," said James Watson, Panattoni's head of development for Southern England and London.
($1 = £0.7569)
(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Emelia Sithole-Matarise)
