Urban and last-mile logistics finance

How much can you borrow against a last-mile logistics unit?

Borrowing on a let urban last-mile logistics unit is sized off the rent and the location, and we typically arrange a commercial mortgage up to around 70 percent loan to value (LTV). Because land values and rents in urban locations run well above the national big-box average, the same loan to value supports a much larger advance per square foot than it would on an out-of-town shed.

Lenders look at how the passing rent compares with the wider urban market and how sustainable it is. With London prime rent at around £29 per sq ft in Q2 2025 per Cushman and Wakefield, against £11.90 per sq ft for national prime big-box per Colliers, the premium is real but lenders test that it holds. The scarcity of urban land underpins both the rent and the value the loan is sized against.

Covenant strength still matters even where the rent is high. A last-mile unit let to a parcel carrier, grocery operator or major retailer on a sound lease gives the lender a clear income to underwrite, and the depth of demand for delivery space in a major population centre supports the reletting case. We present the rent, the location and the covenant together so the loan to value reflects the real strength of the urban income.

Why does last-mile cost more to finance per square foot?

Last-mile units are the premium segment because proximity to customers matters more than floor area, and the land they sit on is scarce. That scarcity drives both rents and capital values far above the big-box average, so the same loan to value ratio translates into a larger commercial mortgage per square foot than on an out-of-town distribution warehouse.

For investors this means a smaller footprint can carry meaningful debt on the strength of its rent. Lenders price the segment keenly because the structural shortage of consented urban land underpins values, while still testing how readily the unit would re-let within its local delivery catchment if the tenant left.

The flip side of high values is a larger deposit in cash terms. At a loan to value up to around 70 percent, the same 30 percent equity share represents more money per square foot than on an out-of-town shed, so we map the deposit clearly at the outset. The trade-off is that the scarcity of urban land has tended to support both the rent and the capital value the loan is sized against over time.

What rates and terms can you expect on an urban logistics deal?

Pricing on a let last-mile unit reflects strong investor demand and the structural land shortage that supports values. Investment commercial mortgages on well located stock with a sound covenant tend to price competitively, with the rate set off the rent, the location, the covenant and the loan to value. Leases here commonly run five to fifteen years at premium rents, giving lenders a clear income to underwrite.

Development is treated more cautiously. Urban and multi-storey schemes carry higher build cost and complexity, so development facilities are sized against cost and end value, usually up to around 65 percent loan to cost, on a shorter term that covers the build and letting before clients move onto a term commercial mortgage.

Where an investor wants certainty over a longer hold, fixing the rate locks in the cost of the commercial mortgage against the premium urban rent the unit produces. We weigh the rate, the term and any amortisation against how long the client intends to hold the last-mile unit, so the structure suits the strategy rather than just the headline price.

Can you fund multi-storey and intensified urban schemes?

Yes. Where occupiers take multi-storey or intensified sites to make the most of scarce urban plots, we arrange development finance sized against the higher build cost and end value. Urban construction carries more cost and complexity than a standard shed, so we present the scheme so the facility is sized realistically and the equity requirement is clear from the outset.

Where a site is bought ahead of planning or letting we arrange bridging to secure it, then move onto development, stabilisation and term facilities as the scheme lets up. Once the units are let and income is proven, clients refinance onto a longer term commercial mortgage against the stabilised urban rent.

Intensification can lift the rent a plot produces, which is part of the appeal, but it raises both the build cost and the construction risk. Lenders weigh that risk against the strength of urban demand and the end value, and they often want comfort on pre-letting or occupier interest before committing to the higher leverage a multi-storey scheme needs. We frame the demand evidence so the development facility is sized realistically.

Can you refinance or remortgage a last-mile logistics unit?

Yes. We refinance let urban and last-mile units onto a new investment commercial mortgage or term loan, commonly to release equity, fix a rate or replace a maturing facility. The loan to value is reset against the current rent and value, and because urban rents have tended to grow strongly, a unit can often support a larger advance than at the original purchase.

The structural shortage of consented urban land underpins values, which generally supports the figure a refinance is sized against. With London prime rent at around £29 per sq ft in Q2 2025 per Cushman and Wakefield, against £11.90 per sq ft for national prime big-box per Colliers, the premium per square foot means even a modest footprint can carry meaningful debt at a sensible loan to value.

Where a development scheme has just completed and let, timing the remortgage onto a term commercial mortgage once income stabilises lets the client move off shorter development pricing and lock in a longer hold. We present the rent, the location and the covenant so the new facility reflects the real strength of the urban income.

Because urban land is so scarce, the value a refinance is sized against has tended to hold up well through the cycle, which gives investors confidence to release equity and recycle it into the next site. We watch the lease events and the local rental evidence so a remortgage is taken at the point the income best supports a larger advance at a sensible loan to value.