E-commerce penetration of North American retail, which crossed 20% of total retail sales during the COVID-19 acceleration per Statistics Canada and the US Census Bureau, fundamentally reshaped industrial demand by compressing the required delivery radius. Last-mile logistics operators need facilities within 30 kilometres of dense population centres to achieve same-day or next-morning delivery windows, pushing industrial demand into infill locations that had historically been passed over for cheaper exurban sites.
The resulting cap rate compression in urban industrial was among the sharpest of any CRE sector: per CBRE's Industrial & Logistics Market Outlook, average cap rates in top-tier last-mile corridors compressed from the high 5s to the low-to-mid 3s between 2017 and 2022, with subsequent modest decompression as interest rates rose.
Modern logistics facility specifications are a direct output of e-commerce fulfillment economics. Clear height is the most frequently cited spec: buildings constructed before 2005 typically offer 28-32 feet of clear height, adequate for traditional pallet racking but insufficient for the automated storage and retrieval systems (AS/RS) that large fulfillment operators deploy in buildings with 36-40 foot clear heights.
Dock door ratios are the second critical spec: Class A bulk distribution typically provides one dock per 8,000-10,000 square feet of floor area; last-mile and parcel sortation facilities require one dock per 3,000-5,000 square feet to handle the higher shipment frequency of e-commerce fulfillment. Truck court depth of 180-200 feet (to accommodate 53-foot trailers plus additional queuing) and heavy power supply (1,200-2,000 amps, three-phase) are table-stakes requirements for institutional tenants and routinely cited in NAIOP's Development Magazine as minimum thresholds for new Class A development.
Cold storage and refrigerated logistics represent the highest-premium industrial subtype, trading 150-250 basis points tighter on a cap rate basis than ambient industrial in comparable locations, per JLL's Cold Storage Market Perspective. The premium reflects barriers to entry: refrigerated construction adds $150-250 per square foot in hard costs versus ambient warehouse, the trained labour pool for operating cold facilities is smaller, and functional obsolescence risk is asymmetric; a cold building can be converted to ambient, but an ambient building cannot be converted to cold without structural reconstruction.
An underwriting-specific risk is the phase-out of R-22 refrigerant (completed in 2020 under the Montreal Protocol), which renders older cold buildings with legacy refrigeration systems functionally obsolete and requires full mechanical replacement before a credit institutional tenant will execute a long-term lease.
Industrial cap rates vary by subtype in a pattern that reflects reversibility, obsolescence risk, and tenant credit quality. As of 2024, per CBRE and Cushman & Wakefield market data, Class A last-mile urban industrial has traded in the 3.5-4.5% range in gateway markets; bulk distribution in major logistics corridors has traded 4.5-5.5%; mid-bay and shallow-bay flex product trades 5.5-7.0%; and manufacturing facilities trade at a wider spread still, reflecting the idiosyncratic tenant-improvement cost and functional specificity that makes re-leasing more expensive if a manufacturing tenant vacates.