Investors in European real estate could be on the cusp of what they have been waiting for: a reason to be excited again. After decades of rapid globalisation and deepening global trade dependencies, Europe's economic strategy has begun a meaningful shift towards resilience and greater autonomy. This trend will unlock new investment opportunities in industrial real estate on a scale that potentially rivals ecommerce for its seismic impact.
The world is changing. A series of global shocks – including the Covid-19 pandemic, supply chain disruptions, geopolitical conflicts such as the war in Ukraine, and increasing great-power tensions – have combined to expose the vulnerabilities inherent in Europe’s highly globalised value chains. There is a growing consensus that Europe must reindustrialise to secure economic resilience and to breathe new life into the economy.
Following vast EU industrial policy changes in 2022, there is increasing evidence that this is already happening. The share of companies investing in nearshoring has risen from 42% in 2024 to 56% in 2025, according to a recent survey by Capgemini [1]. Microsoft, Volvo, Sanofi, GSK, Novo Nordisk, Nestlé, Rheinmetall, and many others have announced significant investments in expanding production capacity in Europe for 2025.
Chart 1 shows the growth in demand for nearshoring industrial capacity.
Chart 1: Percentage of organisations that have invested in reshoring or nearshoring most of their manufacturing or production increases to 68%
Value chains and the need for resilience
The future of Europe in a more fragmented world rests in its ability to research, develop, prototype, mass-produce, and distribute a greater share of essential goods. This is predominantly within its own borders, with neighbouring European economies, and across a wider range of value chains. This has enormous connotations for production and supply chain property in Europe, as the capacity and facilities to underpin this systemic shift are lacking today.
Take solar energy as an example. The European Union’s Net-Zero Industry Act was agreed in April 2024. It mandates that at least 40% of the EU’s annual deployment needs for net-zero technology are met by domestic manufacturing by 2030. Currently, China accounts for 95% of the world’s solar panel production, so the new “Solar Charter” represents a significant departure from a long-term dependency on China. There is a similar approach to electric vehicle (EV) batteries, pharmaceuticals and many other essential value chains.
While the list of meta trends driving Europe’s industrial revival is numerous, we believe there are five forces that are driving the nearshoring of production to Europe. These are:
- DeglobalisationAfter decades of expanding globalisation, trade growth has slowed and, in some areas, reversed. Companies are rethinking long-distance supply chains that were optimised for cost but not robustness. There is a movement away from extreme offshoring as firms seek to localise production for reliability. Reshoring supply chain capacity procurement enquiries increased by 24% in 2024, with total supply chain dependency on near-shoring locations nearly doubling to 10% in the last five years [2].
- Protectionism and trade tensionsHeightened trade barriers (tariffs and export controls) and economic nationalism are forcing European industries to adapt. European policy is shifting to carefully protect strategic industries, while still engaging in trade. The European Commission’s concept of Open Strategic Autonomy encapsulates this balance: remaining open to trade and cooperation, but reducing dependencies across a range of sectors.
- Global supply chain riskThe risk embedded in international supply chains has increased. Events like port closures, natural disasters, or geopolitical conflict can ripple globally. What was once taken for granted (cheap shipping and just-in-time delivery) is now seen as a vulnerability. The conflict between Israel and Iran has had material and immediate impacts on shipping flows through the Strait of Hormuz. Iran’s use of GPS jammers made it too risky for ships to navigate through the strait, preventing over 790 ships from passing through each day. Meanwhile, shipping costs per 40-foot equivalent units out of ports in the United Arab Emirates increased by 76% between May and June 2025 [3] . A larger barrier, however, is insurance. This cost has surged, rising from 0.125% of the vessel’s value to 0.45% in just a few weeks. Some US, UK and Israeli vessels are unable to obtain insurance at all [4].
- Security and defenceAs we are constantly reminded in the press, Europe’s security landscape has fundamentally changed, especially after Russia’s invasion of Ukraine. There is a political push for significantly higher defence spending (some calling for up to 3-5% of gross domestic product) to ensure security. This translates into large orders for military equipment and defence-adjacent products (such as drone components and other technologies), which European nations are striving to produce domestically or within Europe. The UK’s agreement to operate 20 US F35A jets made by Lockhead Martin, out of the UK, will create an estimated 2,000 jobs across 100 companies [4].
- Automation and Industry 4.0Advances in automation, robotics, and digital manufacturing (Industry 4.0) are reducing the labour-cost gap that once drove outsourcing to low-wage countries. Automation makes it feasible to produce more competitively in higher-wage European locations. European firms are adopting technologies like artificial intelligence, sensors, and 3D printing in manufacturing. This technological shift is tipping the scale towards making products in Europe.
In combination, these forces set the stage for a significant reinvigoration of Europe’s industrial base. Our conclusion is that over the next five-to-10 years, Europe will require more factories, more investment in research and development (R&D), and more production capacity. This will lead to a greater share of goods consumed in Europe being made in Europe.
What industries will these changes affect most?
We believe that the need to secure resilience in European economies will significantly affect six key value chains. These will create new opportunities for real estate investors to buy into stronger asset-class performance from a deeper industrial demand base. The creation or modernisation of stock to support reindustrialisation also brings new investment opportunities. The six key value chains include (1) security, defence and technology, (2) food and agriculture, (3) textiles and clothing, (4) energy and power, (5) machinery and automotives and (6) pharmaceuticals. Chart 2 shows the economic output of each of the value chains, as a share of these strands of the economy.
While industrial output itself accounts for just 20% of EU economic output today, these six value chains run through roughly 65% of the European economy [5] . Reindustrialisation therefore offers both the opportunity to increase resilience in an uncertain world and to drive significant growth, both of which are currently lacking in Europe’s economy today.
Chart 2: Output of each of the value chains, as a share of these strands of the economy
Why should real estate investors be excited about the industrial sector?
Restructuring these value chains will require significant new physical infrastructure, and production and distribution capacity – at scale. These requirements will often be in new locations, with new drivers affecting tenant requirements. They could also breathe new life into existing sites, with modern innovation hubs, pre-production R&D facilities, and prototyping workshops replacing or complementing traditional industrial and trade parks.
The market impact will be notable. As with the structural change in the rise of ecommerce, we believe reindustrialisation is set to drive a new structural shift in higher demand for industrial units. This should further eat into structural vacancy rates, shoring up rental cashflows, and creating long-term value for investors. We could see renewed rental growth pressures too, which would support attractive returns.
There will be significant opportunities to deploy capital to create space, enhance energy efficiency, and improve operational quality to meet future demand. Resilience involves not only bringing production back but also modernising and future-proofing European industry. Consequently, real estate investment will be essential to modernise, repurpose, expand, and future-proof existing properties. This aligns with the EU’s Green Deal and digitalisation policy agendas, which further reinforce these investment opportunities.
This time we believe that industrial property will be the major beneficiary of structural change, alongside logistics assets, and that the opportunity will be broad-based across the following property types:
Industrial:
- Standard industrials – production and assembly plants
- Light industrials – smaller industrial and assembly facilities, workshops and multi-let industrial parks
- Heavy industrials – large-scale, mass-production facilities
- R&D hubs – workshops, pre-production R&D space, innovation hubs and technology parks
- Urban logistics and last-mile locations – cross-docking warehouses
- Midbox logistics – city-fringe locations
- Bigbox logistics – large-scale, multi-level logistics facilities
- Open storage – land or partially covered facilities for large-scale storage of inventory
Reindustrialisation – the next big opportunity for investors in Europe
In summary, Europe is poised for the next wave of industrial revolution, focusing on resilience and self-reliance. By capitalising on these trends, Europe could secure critical supply chains, spur innovation, create jobs at home, and even achieve sustainability goals (shorter supply lines and greener production). The shift will not be without challenges, such as higher short-term costs, the need for skilled labour, and balancing open trade with autonomy. But with strong policy support emerging, the continent stands to benefit significantly over the next five–to-10 years from reindustrialisation. The industrial and logistics real estate sector is set to thrive from this new wave of demand, as Europe builds the factories and distribution networks of a more resilient future.- Capgemini – The resurgence of manufacturing. Reindustrialisation strategies in Europe and the US
- QIMA 2025 Nearshoring Barometer
- Maritime Information Cooperation & Awareness Centre, CNBS
- Financial Times
- Oxford Economics