First-Mile Distribution: How Border Industrial Markets Are Evolving

As U.S. industrial real estate markets continue to evolve in response to shifting trade dynamics, land ports along the U.S.-Mexico border are seeing distinct patterns emerge. In a recent Commercial Property Executive article, Link Logistics managing director Ryan Keathley described how border warehouses are increasingly functioning as "first-mile distribution" rather than simple cross-border pass-through points. Below, Keathley, who oversees leasing and operations across Link Logistics’ Texas industrial properties, explains what's driving this shift in logistics real estate and warehouse space demand—and what it means for border industrial markets.

You've described border warehouses as functioning more as "first-mile distribution" now. What does that shift look like operationally?

Keathley: El Paso is a prime example of this shift. It's what we call a land port—instead of goods arriving by sea, they cross overland from Mexico's northern manufacturing region. Historically, we saw a twin plant model where raw materials would come to the U.S. side, cross into Mexico for manufacturing or assembly, then return as finished goods for distribution across the country via regional nodes. At the border, the product was essentially flow-through.

What we're seeing now is warehouse space on the U.S. side swelling considerably in size. Instead of goods immediately dispersing to Dallas, Atlanta, Chicago, the Inland Empire or other regional nodes, they're staying at the border in much larger volumes than we've ever seen before. Industrial real estate on the U.S. side is operating as the first distribution point in the supply chain, holding substantial inventory rather than just facilitating cross-border movement.

What's driving companies to hold inventory at the border rather than moving finished goods inland immediately?

Keathley: Manufacturing capacity in northern Mexico has grown significantly and is expected to continue expanding. Several factors are contributing to this: nearshoring momentum, USMCA compliance considerations and companies seeking to position their supply chains closer to end consumers. There's clearly an economic rationale—whether it's more cost-effective to operate logistics warehousing on the U.S. side but closer to the border, or whether proximity to the port provides supply chain advantages for forecasting and distribution timing.

We're also seeing consolidation in how companies approach industrial space. Some of our tenants previously occupied two or three buildings and wanted to consolidate operations, but even in consolidation, they're not downsizing for efficiency. They're growing their footprint by as much as three times, which tells us they're doing something fundamentally different than before.

How has this changed what users are looking for in warehouse space for lease?

Keathley: The warehouse space requirements mirror what we've seen evolve in major inland markets like Dallas over the past two decades, but these specs are new to markets like El Paso. Buildings have gotten larger, truck courts have expanded and dock door counts have increased substantially. Trailer parking and staging areas have become critical—something we rarely saw in El Paso before because product was simply moving through.

Historically, you might have seen single-load buildings with 120- to 130-foot truck courts and 24- or 28-foot clear heights. Now we're seeing demand for cross-dock configurations that require 180- to 185-foot truck courts to accommodate trailer storage, and clear heights are reaching 36 feet or more. These are modern distribution specifications that reflect the fact that industrial space in these areas is holding more goods for longer periods.

What types of products and industries are driving demand for logistics real estate in El Paso?

Keathley: Northern Mexico has developed deep expertise and supplier networks in several key sectors over 30-plus years. Automotive has always been strong—particularly wire harness manufacturing for vehicles, which is extremely labor-intensive. There's a submarket in Ciudad Juárez, just across the border from El Paso, that is actually called Electrolux because it is so focused on appliance manufacturing. This makes sense logistically because appliances like clothes dryers are bulky but relatively light, making ocean shipping from Asia inefficient.

We're also seeing significant activity in electronics and electrical equipment assembly, driven partly by data center infrastructure demand. Computer components, server assembly and related technology manufacturing have long been competencies in the region. Medical device components represent another category, along with automotive parts beyond wire harnesses—air conditioning components, audio systems and various subassemblies.

How should the market interpret the current construction pipeline of warehouse properties near the border, given that much of it is speculative?

Keathley: Looking at El Paso's fundamentals, we saw nearly 2.9 million square feet of absorption in 2025, with 875,000 square feet absorbed in the fourth quarter alone. Vacancy rates that were approaching zero in 2022 have risen as new industrial properties came online, but absorption has remained healthy.

The speculation reflects developer confidence in sustained demand for warehouse space driven by cross-border trade and nearshoring trends. Some of that construction started when market conditions were tighter. Political uncertainty around tariffs and trade policy in early 2025 created a pause, but fundamentals have proven resilient. If the USMCA review this summer provides clarity and stability in trade relations between the U.S., Mexico and Canada, we expect absorption to continue pulling down that available inventory in industrial space for lease.

What factors are companies weighing as they continue to evaluate logistics real estate in border markets?

Keathley: Proximity is a major consideration. Companies are recognizing that managing supply chains in Mexico is fundamentally easier than coordinating operations across the Pacific. The ability to drive across the border rather than fly to Asia for oversight makes a significant operational difference.

Cost competitiveness has also shifted. Labor costs in Mexico have become increasingly competitive with China, which changes the calculus when you factor in shipping expenses and lead times. We're seeing companies from various countries, including Taiwan, actively evaluating Mexican manufacturing operations as geopolitical considerations make Western Hemisphere supply chains more strategically attractive.

Trade policy stability remains a critical variable, particularly with the upcoming USMCA review I mentioned. Companies are looking for clarity on the framework that will govern cross-border trade between the U.S., Mexico and Canada. That certainty—or lack thereof—directly influences investment decisions and facility planning in border markets.

What we're observing is that this first-mile trend appears to be in relatively early stages rather than reaching maturity. As supply chain strategies continue to evolve in response to geopolitical developments, the emphasis on locating manufacturing closer to end consumers seems likely to sustain interest in industrial properties along the southern border.

Link Logistics operates more than 50 million square feet of industrial properties across Texas. Explore Central Region logistics real estate or view available warehouse space for lease in Austin, Dallas, El Paso, Houston and San Antonio.