The Last Mile Got Expensive Because the Warehouse Did

Fast delivery is a real-estate problem before it is a logistics problem. Promising same-day or next-day service to a dense urban population requires inventory already positioned near that population, which requires industrial space inside or adjacent to the city. That space is the scarcest category in most metropolitan property markets, for reasons that have nothing to do with commerce: industrial land near city centres has been steadily converted to residential and mixed use over decades, it is politically difficult to create more, and warehousing competes for it against uses that generate far more value per square metre. The result is a market that behaves oddly compared with the rest of commercial property. While office space in many cities has faced elevated vacancy and falling rents, well-located industrial and logistics space has generally seen the opposite — low vacancy and sustained rent growth — because the tenants are not choosing it for prestige and cannot substitute a cheaper location without breaking the service promise that justifies the whole operation. A distribution centre an hour further out is materially cheaper and simply cannot support the same delivery window. That cost lands in places where it is not labelled. Retailers analysing delivery economics typically examine vehicles, fuel, driver hours and route density, all of which are visible and controllable. Occupancy cost for the forward stock position is frequently treated as fixed overhead and allocated across the business rather than charged to the service it exists for. When it is properly allocated, the profitability of fast delivery in dense markets often looks quite different, and the difference is largest exactly where the service is most heavily promoted. The responses that work are mostly about using less of the expensive thing. Height is cheaper than footprint, so automation that permits dense vertical storage converts a rent problem into a capital one. Smaller forward positions holding a narrow range of genuinely fast-moving items, replenished from cheaper regional space, concentrate the expensive square metres on the inventory that needs them. Shared or third-party facilities spread a fixed cost across tenants whose peaks do not coincide. And unattended collection points remain the least glamorous and most reliable lever, because they replace the most expensive segment of the journey with one the customer performs — which is why they keep spreading in markets where nobody markets them.