The final mile

As e-commerce has exploded over the last few years, final mile, or last mile, warehouses have played a crucial role in helping suppliers deliver goods to consumers as quickly and efficiently as possible.

Unlike other industrial sites, final mile facilities are strategically located in more urban or residential areas, closer to the end customers. Utilized primarily by large online retailers like Chewy, Amazon, or Walmart, logistics companies like FedEx, and other retailers who want to ship to customers quickly, final mile facilities are crucial for these e-commerce companies to stay competitive.

Joe Lopez, CPM®, LEED Green Associate, Link Logistics

Fueled by consumer demand, e-commerce is expected to continue its upward trend. According to data from Statista, revenue in the e-commerce market in the United States is forecast to grow by 68% ($614.2 billion) between 2023 and 2028, to hit a new peak of $1.5 trillion in 2028.

“Our customers that service e-commerce consumers quickly realized that the closer they are to those consumers, the better off they’ll be. We’ve seen this proliferate in the last few years, and I don’t think it’ll slow down,” says Joe Lopez, CPM^®, LEED Green Associate, senior vice president for property operations at Link Logistics in Fort Lauderdale.

Industrial distinction

Brad Ashley, CPM^®, RPA, Newmark Zimmer, AMO^®

Final mile facilities are similar to other industrial facilities, with most tenants on industrial triple-net leases. Still, there are distinctions, says Brad Ashley, CPM^®, RPA, a member of the 2024 IREM Board of Directors and managing director of property and facilities management with Newmark Zimmer, AMO^®, in Kansas City.

“All the fundamentals of managing traditional industrial are essential here—making sure the buildings are well-maintained, customers have enough dock doors, enough truck court depth, and good highway access—but they’re a little bit different than a big box warehouse that may be attracting a different kind of tenant,” says Ashley.

An example of a unique characteristic of final mile facilities is special HVAC needs.

“Some customers, such as those who have medicine in their warehouse, are more temperature and humidity sensitive than others,” Ashley says. “There may be additional requirements during the build-out, and we work closely with the utility companies to make sure the tenants have good internet and power to operate.”

Lee’s Summit Commerce Center, a final mile facility near Kansas City. Photo courtesy of Newmark Zimmer, AMO^®

Lopez says his company has maximized the opportunity of final mile by developing an expert in-house property management and construction team dedicated to understanding what it takes to manage a final mile facility. “They are focused on delivering good service and having a direct connection with our customers,” Lopez says. “It’s not always one-size-fits-all. Just because you have Amazon in one facility doesn’t mean Amazon in another facility will have the same operation. Being connected to our customers means that when issues or questions arise, we’re already in lockstep, understanding how to solve the problems before they become larger concerns.”

Unique challenges

Due to the desire to be close to customers, finding the right location for a facility can be difficult. “We fortunately have a lot of space in the Midwest, but some of those tighter markets have a bit of drive time,” Ashley says. “In areas like San Diego or New York City, locations aren’t always right in the city; they’re out in an industrial pocket and may still require 20-, 30-, or 40-minute drives.”

Along with establishing locations farther afield, developers have established more central locations by repurposing existing properties.

Other challenges include negative community feedback due to truck traffic and congestion in residential areas and, due to the more constant truck traffic, more wear-and-tear and required maintenance on the final mile facilities. 

Technology

Final mile tenants use a variety of technologies to optimize their logistics and operations. Examples include:

• Route optimization systems, which help shippers plan the most efficient routes
• Real-time tracking systems for up-to-date delivery statuses
• Automated vehicle loading systems, which automate the process of loading vehicles and save time and space
• Warehouse execution software (WES), which can help determine which packages should go in what trucks
• Delivery drones, which can drop off smaller packages quickly without dispatching staff in some areas

Although property managers typically don’t interact with the technologies, they must be familiar with all of them and be certain that the facility can accommodate these technologies.  “Understanding the technology out there is huge,” Ashley says.

Sustainability

A natural byproduct of final mile is reduced distances for trucks to drive and reduced emissions, with route optimization technology further driving this benefit. Property managers are also seeing customers increasingly focus on other sustainable practices.

“As property managers, we don’t control a customer’s sustainability initiatives, but I am seeing more alternative fuel vehicles, whether electric or natural gas, used by these delivery companies,” Ashley says. “I’ve also seen other shifts toward sustainable preferences, such as expecting to have LED lighting. They’re also looking at their natural gas usage and water consumption. We have very open, transparent conversations with them and ensure we’re partnering with them well to be responsible citizens on the sustainability front.”

A promising future

As online shopping continues to be the preference for many consumers, final mile facilities will remain vital and a promising prospect for motivated property managers.

“Final mile is going to continue to emerge because e-commerce is not going anywhere,” Ashley says. “Even old brick-and-mortar companies are embracing e-commerce more to remain relevant and competitive. So, final mile will continue to be in vogue for many years to come.”