Last-mile logistics refers to the final leg of the supply chain: the movement of goods from a local distribution node to the end consumer's door. The real estate that supports this function is typically smaller-format industrial (20,000 to 150,000 SF), located within dense urban and inner-suburban areas, and configured for rapid parcel sortation and delivery vehicle staging rather than long-term bulk storage.
The growth of same-day and next-day delivery expectations has made proximity to population density the primary driver of last-mile facility value, inverting the traditional industrial location logic that favoured cheap land in distant suburban corridors.
Urban infill industrial is structurally scarce because the land it occupies is subject to intense competing demand from residential, retail, and mixed-use development. Zoning authorities in many municipalities have rezoned industrial land for higher-density residential use over the past two decades, reducing the supply of urban industrial sites precisely as demand for last-mile facilities has surged.
This supply-demand imbalance has driven last-mile rents to levels that would have been unthinkable for industrial space a decade ago; in some gateway markets, urban infill industrial rents now exceed $20 per square foot on a triple-net basis, approaching or surpassing suburban office rents.
The key metrics for last-mile facilities differ from traditional distribution. Clear height is less critical (24 to 32 feet is acceptable, versus 36 to 40 feet for regional distribution) because the facilities emphasise throughput speed rather than vertical storage density.
What matters instead is dock door count relative to square footage (higher ratio for rapid parcel processing), proximity to major transportation corridors, truck access and turning radius in constrained urban sites, and zoning that permits extended operating hours and overnight truck traffic, a significant barrier in mixed-use neighbourhoods where noise bylaws restrict logistics operations.
Institutional investors are underwriting last-mile assets differently from traditional industrial. Rent growth assumptions are more aggressive, reflecting structural supply constraints that are unlikely to ease.
Cap rates are tighter, reflecting both the income growth outlook and the land value embedded in urban infill sites (many last-mile facilities sit on land worth more for alternative development, creating a floor under the asset's value). Lease terms are often shorter than in bulk distribution, and tenant credit profiles skew toward third-party logistics providers and e-commerce operators rather than traditional manufacturers.
The underwriting challenge is distinguishing genuinely supply-constrained last-mile locations from suburban parcels marketed as last-mile but lacking the population density proximity that defines the category.