S
ustainability and ESG considerations have reshaped many sectors over recent years, but the current political climate has shifted focus toward resilience, driving governments—especially in Germany—to prioritize defense and security. Massive investment programmes have opened unprecedented funding for critical infrastructure and the armed forces, creating a boom for suppliers of military equipment and services. From a real‑estate standpoint, several key dynamics emerge.
**Military‑used sites after the Cold War**
Once the Berlin Wall fell, former military training grounds were cleared of unexploded ordnance or turned into nature reserves. The state‑owned agency BImA sold former barracks to municipalities or investors, converting them into business parks, schools, offices, or housing. Prime‑location military administration buildings were also divested to private buyers. Demand for such properties is now rising again.
German law equips authorities with tools to secure land for defense. The Land Procurement Act (Landbeschaffungsgesetz) authorises expropriation when military needs arise, such as compensating displaced businesses. The Military Protection Area Act (Schutzbereichsgesetz) sets strict permitting rules for construction on designated military land; landlords may be compelled to allow demolition or new builds, and municipalities cannot adopt zoning plans until the military use ends. Military authorities can pre‑empt municipal pre‑emption rights on certain properties.
Buildings on military sites are governed by a web of exemptions. State building codes (Landesbauordnungen) waive standard building permits for defense structures. The Federal Emission Control Act (Bundes‑Immissionsschutzgesetz) and its 14th Ordinance (14. BImSchV) relax substantive requirements and permitting. The Building Energy Efficiency Act (Gebäudeenergiegesetz) exempts such buildings from energy standards. The Federal Environmental Impact Assessment Act (Umweltverträglichkeitsprüfung) allows simplified procedures, while the EU Nature Restoration Regulation treats defense land specially.
Although the land is typically state‑owned, private firms often build, supply, or partner in public‑private‑partnerships. Engaging requires compliance with public procurement rules: the Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen), the Defence and Security Contract Award Ordinance (Vergabeverordnung Verteidigung und Sicherheit), and the Defence Procurement Acceleration Act (Bundeswehrbeschaffungsbeschleunigungsgesetz). Multiple authorities—military, civil, federal, state—intervene, and NATO procurement adds further layers. The 1953 Price Cap Regulation lets authorities reduce prices deemed excessive. Contractors must also meet security mandates: use cleared personnel, implement access control, safeguard classified data, and follow strict‑need‑to‑know policies.
**Properties used by the defence industry**
The defence sector is expanding: shipyards, tank factories, aircraft plants, drone manufacturers, ammunition producers, logistics firms, IT and engineering companies, and specialised data centres are all growing. Sites—whether production or IT—must meet heightened security standards: robust physical barriers, controlled access, and emergency power supplies. Contracts often stipulate these requirements, referencing the German Ministry of Economy and the Security Manual (Geheimschutzhandbuch). The forthcoming Federal Framework Act on Critical Infrastructure Protection (KRITIS‑Dachgesetz‑Entwurf) will codify future security obligations for defence‑industry sites.
Planning and permitting vary by property type. Vessel, tank, and ammunition factories face federal, state, and regional hurdles; municipalities must balance defence needs with neighbourhood safety, especially Seveso‑type explosion risks. Permits may involve public consultations under the Emission Control Act and additional approvals under the War Weapons Control Act (Kriegswaffenkontrollgesetz).
Neighbouring properties may be required to tolerate higher disturbance levels. Planning law provisions (Baugesetzbuch) and lower emission thresholds for defence sites can impose such obligations. Renewable energy projects—wind turbines and PV farms—often clash with defence concerns: turbines can interfere with radar, while PV arrays may disrupt flight operations, leading to permitting rejections or restrictions.
**ESG, foreign investment, and tax implications**
Real‑estate assets tied to military or defence activities are scrutinised under ESG criteria and other sustainability frameworks. The closer an asset or company is to active defence operations, the stricter the restrictions. German foreign‑direct‑investment rules treat land acquisition by non‑EU/Non‑EFTA investors as potentially sensitive; stronger defence links increase the likelihood of mandatory or voluntary filing to pre‑empt Ministry of Economy reviews post‑transaction.
Tax matters also matter. Sellers cannot waive the VAT exemption on real‑estate sales, which can erode input‑VAT recoveries and effectively raise the purchase price for buyers.
In summary, Germany’s pivot toward defence resilience has reshaped the real‑estate landscape. Military‑used sites are re‑emerging as valuable assets, subject to a complex matrix of exemptions, permitting, and security requirements. Defence‑industry properties face stringent planning and security standards, while neighbouring sites may bear additional burdens. ESG compliance, foreign‑investment scrutiny, and VAT rules further influence transaction dynamics. Understanding these intertwined legal, regulatory, and operational layers is essential for investors, developers, and contractors navigating Germany’s defence‑focused real‑estate market.
