Real time for defence: How defence investment is reshaping Portugal’s real estate market

Across Europe, countries are increasing investment in military and defence capabilities. And Portugal doesn’t want to be left behind.

With its privileged position in the Atlantic-Europe, strong energy competitiveness, and excellent technological hubs, Portugal’s real estate market will benefit from the pressure already seen in some EU countries to serve the defence sector.

The Portuguese Defence Minister has announced that Portugal will spend 2% of GDP on defence by 2026, using funds from the state budget, the Recovery and Resilience Plan (RRP) and the Security Action for Europe fund (SAFE).

Investment in Portugal won’t stop there. Further spending is planned until 2034, with an updated 5% of GDP in defence spending to be achieved by 2035 for NATO members.

Europe's strategy of strengthening the defence sector is leading to an increase in multinational companies investing in Portugal. There’s also significant growth in the number of Portuguese companies active in the area. They receive funding from initiatives such as the European Defence Fund (EDF) and attract venture capital funds.

The state budget will boost defence spending by EUR772 million, a 25% increase, bringing the total to EUR3.84 billion. This funding will be distributed across the army, navy and air force.

The previous government passed two important laws. The Military Program set state investment of up to EUR5.57 billion (updated to EUR5.8 billion) for resources and equipment for the armed forces until 2034. And the Military Infrastructure proposes investment of EUR270 million in military infrastructure until 2034. These measures indicate a broad political consensus on the importance of investing in defence. It is the largest military investment at one time, encompassing all domains: land, sea, air, and space.

Investments in Portugal’s defence and military sectors will be made almost exclusively by the Portuguese state, partially using EU programs and funds such as the European Defence Fund. More than 30 Portuguese private companies, research centres and universities have participated in and received financing from this fund. It's total budget for 2021-2027 is EUR7.95 billion.

Some Portuguese companies, such as Tekever, are positioning themselves to play a significant role in the future of defence. The Portuguese unicorn company has factories in Portugal and the UK (and will also have a factory in France) and offices in the US and France. It’s become a European leader in defence tech, drone design and manufacturing, a status consolidated by their EUR1.2 billion evaluation.

Tekever has developed advanced defence systems and technologies, currently used by organisations, governments and security agencies worldwide. Tekever's drones can fly for up to 20 consecutive hours and so far have 10,000 operational flight hours in Ukraine. The company is integrated into the Royal Air Force modernization program and develops programs with the french Marine Nationale. In 2028, it will launch its first civilian-military aircraft to operate in military and search and rescue missions.

But due to the current lack of experience in the Portuguese private defence sector, it’s widely expected there will be plenty of space for international companies and consortiums to enter the Portuguese market. Some of the companies licensed to trade and sell military goods, equipment and technology in the defence sector in Portugal include Leonardo, Lockheed Martin, Rolls-Royce, Embraer, Urovesa, Indra, General Dynamics, Naval Group, SAAB, Eurofighter, Thales Group or Patria Belgium Engine Centre SRL.

 

Army investment is driving development in infrastructure

The Portuguese Army is expected to receive investments of up to EUR100 million in infrastructure in the next ten years, including the development of a military mobility cluster in the south of the country. The infrastructure in Alcochete, Beja, Sines and the Port of Setúbal have been selected for this project.

A new dock will be built at the Port of Sines, creating a multipurpose terminal, capable of accommodating large military cargo. Modernisation works are also planned for transportation infrastructure across Portugal, including the train connections between Sines, Beja, Setúbal and Alcochete. These projects are part of a wider state investment aimed at modernising Portugal’s railway lines and building a high-speed train network connecting the country’s main cities.

The Portuguese government recently signed a financing agreement with the army for EUR31 million to build 427 homes for 600 military personnel including in Lisbon, Porto and Leiria. The public procurement procedure for some of the Porto homes is already underway. And the tender procedures for the other housing projects should begin soon.

The Portuguese government also plans to build a new ammunitions factory in Alcochete, which is expected to produce 50 million rounds per year. The investment is estimated at EUR40 million and the government aims to find a partner with a private business, potentially international, while maintaining a minority stake. The Portuguese Defence Minister has recently reaffirmed that his “preferential model goes through private investment, potentially external – there are also national investor interested – with a state participation as well,” signalling a public-private partnership.

 

Boosting investment to develop an innovative Navy

Given Portugal’s geostrategic position, the Navy is an important branch of the Portuguese defence sector. It's therefore the sector receiving the largest share of planned investments from the Military Programme. EUR1.7 billion will be invested until 2034, in addition to EUR72 million in military infrastructure.

These investments include EUR42 million to equip the Navy with new integrated communication systems and approximately EUR300 million to acquire six new patrol ships by 2030. Earlier this year the Portuguese navy also signed an agreement to buy two new replenishment ships in 2028.

Portugal is also building an innovative, multipurpose ship, costing EUR132 million, which is being constructed by Damen Shipyards in Romania. It's expected to be delivered at the end of 2026. The ship will work as a drone carrier for air, surface and submarine drones.

 

Investment will modernize the Air Force

Investments are also planned for the air force, with infrastructure projects up to 2034 estimated at around EUR52 million.

Currently Portugal is focused on modernizing its air force and replacing its 28 F-16 Falcons. The selection process is still ongoing.

Eurofighter Typhoon (the European consortium comprising Leonardo, Airbus and BAE Systems) is well positioned given their European background and Airbus’ technological centre in Coimbra, employing over 1,600 employees. Lockheed Martin’s F-35 or the French Dassault Rafaele are still viable options.

Facilities for storage, maintenance and repair will need to be expanded and modernized to meet the technical and safety requirements of new fighter jets and helicopters. This includes hangars capable of housing advanced stealth aircraft, reinforced runways and taxiways for heavier planes, upgraded fuelling and armament storage systems, as well as state-of-the-art maintenance workshops.

Modernisation works are underway at the military aerodrome of Tancos, expected to be completed by March 2026. This is a key step in Portugal’s plan to upgrade its helicopter fleet, purchasing new aircrafts and enhancing both military operations and civil protection capabilities. The initial investment for the fleet upgrade is approximately EUR50 million.

The government has authorised the transfer of military installations from the current Lisbon airport to Montijo Air Base, with a budget of EUR30 million. This will involve building new infrastructure, renovating existing buildings and constructing support facilities.

Base das Lajes (in the middle of the Atlantic Ocean), will also undergo renovations. Over 90 buildings are set to be refurbished in a project valued at over EUR11 million, most for housing purposes. The base has historically served as a strategic hub for the US, with cooperation agreements in place since 1944, enabling refuelling, logistics and rapid military mobility between the Americas and Europe.

 

Cybersecurity is a growing sector

Investments aren’t limited to traditional defence sectors. Under the Military Program, EUR45 million will be invested in cybersecurity by 2030, with specific allocation plans expected to be announced soon.

So far, we know that Portugal will spend over EUR12 million on the Portuguese Cybersecurity Academy, with funds earmarked for both infrastructure improvements and professional development programs.

According to the International Data Corporation (IDC), the Portuguese cybersecurity market could grow to EUR250 million. And the market for cloud computing is projected to reach EUR1 billion. But these projections were made before Microsoft announced its EUR8 billion investment in a large AI manufacturing and operations facility in Sines, positioning it as one of the largest investments in AI operational capability in Europe.