- September 1, 2021: Vol. 8, Number 8

Last-mile logistics: Commercial real estate’s newest growth engine

by Mike Consol

There is a sea change afoot in the warehouse and logistics business as manufacturers and retailers alike seek to deliver their wares to customers with same-day speed and efficiency. It’s called the last mile, and it has been the talk of the supply-line business and the holy grail of modern logistics.

“Last-mile logistics has become integral in every aspect of our economy and a critical component in the functionality of commercial real estate,” writes K.C. Conway, chief economist at the CCIM Institute in a sprawling report on the topic.

Last-mile logistics is defined as the final — and most expensive — step of the process where a package arrives to the end user or customer in its journey from the factory through distribution channels, Conway explains in detail during a newly published Real Assets Adviser podcast. However, that last mile is dependent on multiple components of infrastructure, including ports, inland waterways, rail, highways, bridges, energy, aviation, and even levees and storm-water management, he says.

Investors have been aggressively pursuing industrial assets across the United States, moving modern industrial ecommerce assets to the top of the list of commercial real estate investment choices, according to Conway, who points out the trend existed pre-COVID and has since only accelerated. For example, a goal for many institutional investors in 2021 is to grow allocations to industrial property from an average of less than 15 percent of their total portfolios in aggregate to more than 20 percent by the end of 2022, creating an aggressive bidding environment for both individual assets and portfolios that come to market.

Conway also notes that from second quarter 2020 through first quarter 2021, industrial properties gained the most in a 12-month price appreciation at 10-plus percent, followed by manufactured home parks at 9 percent, while malls, strip retail, lodging, office, healthcare and even self-storage property types all had negative returns.

Interestingly, today’s ecommerce warehouse requires twice the land area as a decade ago because tenants are anticipating expansion at renewal and are requiring more truck pad parking area.

Because warehouse assets represent less than 5 percent of total operating expenses for ecommerce and package delivery, companies including Amazon, Walmart, FedEx and UPS now operate 24/7 versus 12/6 a decade ago.

Amazon has not only disrupted the way we consume but is also re-envisioning commercial real estate assets. The company is converting many former big-box retail stores into last-mile staging centers. Amazon’s first prototyped this approach with former Toys “R” Us stores and is now expanding to former Kmart stores.

Read the full CCIM Institute report at this link:

Listen to the Real Assets Adviser podcast with K.C. Conway at this link:

Mike Consol ( is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.


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