Last-Mile Facilities See Five-Year 17.2% CAGR

June 14, 2022 – Last-mile facilities have been anecdotally hot. A new five-year review from Avison Young puts data behind the inklings.

The market is popular. The Avison Young review mentions a Wealth Management Real Estate 2022 survey that found “52% of respondents

noted last-mile warehouses as the most coveted segment of the industrial market,” a shift from previous versions of the survey where respondents preferred more traditional locations.

A couple of reasons come to mind for the shift. One is that traditional industrial space has become highly competitive. The properties focus on larger tenants that want the most modern designs and facilities to accommodate automation and robotics. Smaller infill spaces are in heavy demand but are also smaller, and so possibly seen as more affordable investments.

Supporting the idea of less expensive facilities for initial investment is “the desire to secure value-add properties and reposition them for future growth,” according to Avison Young. “This sentiment fits with market activity, as investors turn to older, sometimes obsolete warehouses due to the prospects for rent appreciation in those people-dense areas. In some cases, rising interest rates have also made this type of strategy more profitable than buying newer, stabilized properties.”

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