New Tenant Alert: The E-Commerce Side Hustle
A new wave of tenants is emerging from the e-commerce world: private label entrepreneurs and "side hustle" businesses. These operators are fueling demand for smaller, short-term, and flexible warehouse leases for their fulfillment operations. This segment represents a growing, albeit non-traditional, source of leasing activity.
The universe of potential e-commerce tenants is vast, with approximately 1.9 million active third-party sellers on Amazon alone as of early 2025. These independent businesses are responsible for over 60% of all products sold on the platform, representing a massive, decentralized source of demand for logistics space. This online retail boom creates a disproportionate need for physical warehousing; e-commerce requires three times the logistics space compared to traditional brick-and-mortar sales. For every one billion dollars in online sales, an estimated 1.25 million square feet of distribution space is necessary to manage inventory, fulfillment, and returns. In response, a shift toward "cowarehousing" and other flexible lease models is accelerating. These arrangements provide month-to-month or other short-term contracts, allowing startups and seasonal businesses to scale their footprint up or down without the financial risk of a traditional 3-10 year lease. This agility is critical for operators navigating fluctuating consumer demand and market volatility. The Inland Empire market reflects this changing dynamic, with the industrial vacancy rate reaching a 15-year high of 8.5% in mid-2025. This has been driven by a slowdown in big-box leasing and a surge of new construction completions, creating more options for tenants. Average asking rents have cooled, falling to between $1.03 and $1.04 per square foot as of the second quarter of 2025. While the market for large distribution centers has softened, demand for small-box industrial buildings of up to 50,000 square feet remains robust. Leasing activity for these smaller spaces saw a 29% increase over 2022 averages, driven by local logistics firms and e-commerce entrepreneurs who need to be close to Southern California's dense population centers. To serve these last-mile needs, many online retailers are adopting micro-fulfillment centers. These smaller, strategically located hubs are situated within or near urban areas to shorten delivery distances and meet consumer expectations for rapid shipping, directly competing with the speed of major distributors.
