The rise of e-commerce is driving demand for last-mile fulfillment centers and distribution hubs located closer to urban centers to ensure quicker and more efficient delivery of goods to consumers. In 2022, Forbes estimated that worldwide e-commerce sales were projected at $5 trillion with it expected to reach $6 trillion by 2024. This growth continues to put a strain on the supply chains. The portion of the supply chain that is often viewed as the most challenging part of logistics in e-commerce is the “Last Mile.”
The last mile is what the industry uses to define the final leg of a shipment and can often involve many stops with drops at each stop that are minimal. Forbes notes that complexity can also be increased as there can be multiple pickup points (store, home, distribution center), many delivery modes (owned fleet, outsourced fleet, autonomous, drone) and many destinations (home, business, pickup point, parcel locker). Because of this, there are inefficiencies and cost with last mile delivery that are growing with the growth of e-commerce in general. The ability to deliver the last mile service can directly affect the company’s reputation if not completed to the customer’s desire.
To complete this service, companies want to be located as close to the population centers that they deliver to as possible. One of the challenging aspects of finding these locations for a last mile facility is that in order to be located within close proximity to the users that will be served from the facility, it must be located in portions of the submarket with aging facilities. Empty lots of a sufficient size and the right location are almost non-existent in most cases. Further, the already constructed warehouse availability in these markets is shrinking as some of these buildings are being renovated into uses that are non-industrial such as retail, office, or multi-family.
This e-commerce market is expected to rise to $297 billion by 2030 and growing at a CAGR (compound annual growth rate) of 9.6% from 2022 to 2030. With the continued growth of online shopping, the need for strategically located industrial spaces is expected to increase and the competition with other uses for these industrial properties will continue to increase for last mile distribution centers.