E commerce giants to absorb big real estate this year
To push their ambitious growth plans, leading companies like Flipkart, Snapdeal, Jabong and Amazon had fired the office-leasing real estate market in 2014
Feb 16, 2015
Source : Business Standard

 

New Delhi: After making headlines with their fundraising, deals and valuations through last year, and increasing prime office space absorption across big cities like Delhi-NCR, Bengaluru and Hyderabad, e-commerce majors are set to be in news in 2015 for picking up big real estate.

To push their ambitious growth plans, leading companies like Flipkart, Snapdeal, Jabong and Amazon had fired the office-leasing real estatmarket in 2014. And, if their current plans are any indication, this year could see an even greater uptake by them, say experts.

Flipkart's yet-to-be-signed campus in Bengaluru, likely to be spread over three million square feet, could be the biggest office space deal for an e-commerce firm in 2015. Amazon, Jabong and Snapdeal - and others - are likely to join the race to access big real estate.

Flipkart had last year topped the list among e-commerce players by taking up three office properties, totalling 411,000 sq ft, on Bengaluru's Outer Ring Road, according to data available with Cushman & Wakefield, a leading international consultancy. The e-tailer refused to reveal its real estate plans but it is learnt that Flipkart - which has 10 offices in Bengaluru, where it is headquartered, and 13 warehouses across the country - is in the final stage of signing a deal for its proposed campus, where all its employees will be accommodated.

The company had identified Embassy Tech Village on Bengaluru's Outer Ring Road for its campus, and entered a "pre-commitment" with the Embassy group in October 2014. This campus will be spread over 1.2 million sq ft, with an option for an additional 1.8 million sq ft. The current rental rate for the property is pegged at around Rs 48 per sq ft per month - that translates into a rent of Rs 14.4 crore a month, or over Rs 170 crore a year, according to consultants. On-site construction could take up to three years, and the campus might be in place by 2017, when Flipkart turns 10.

Chief Executive Sachin Bansal had recently told Business Standard that Flipkart was planning to double its tech team over 12 to 18 months from the current 1,000. The total employee strength, 33,000 at present, will grow with business expansion.

In 2014, Jabong and Snapdeal made large office space transactions, too. They are expected to continue to do so this year. While Jabong picked up 120,000 sq ft in Gurgaon, Snapdeal absorbed 115,000 sq ft in Delhi last year. CEO Praveen Sinha confirmed Jabong was this year taking a new and larger rented office. But he did not disclose the details. The company, with more than seven warehouses, also has campus plans but those are not immediate.

Snapdeal CEO Kunal Bahl had earlier said his company did not have ambitious real estate plans. But the company already has several offices in New Delhi's Okhla commercial locality.

Though American e-commerce major Amazon refused to discuss the specifics of its office expansion plans, it is believed to be looking at a large office space of more than one million sq ft in Bengaluru this year. A spokesperson for Amazon pointed out that the company already had campuses in Bengaluru, Chennai and Hyderabad, besides offices in 15 Indian cities. "We also have eight fulfilment centres, covering seven Indian states, that offer a total storage capacity of over half a million square feet to retailers and small and medium businesses." Fulfilment centres are equivalent to warehouses for storage of products. "We are growing at a fast pace and you can expect our real estate footprint to grow this year," the Amazon spokesperson said.

Estimates suggest the total warehouse space uptake could more than double in 2015 to four million square feet. Also, besides the likes of Amazon, Flipkart, Jabong and Snapdeal, those like UrbanLadder, PepperFry, Quikr and FabFurnish are also looking at taking up more office space as their businesses grow.

In 2014, the Grade-A office space taken on lease by online or internet firms in Delhi-NCR touched 567,499 sq ft, against 84,000 sq ft the previous year, according to Cushman & Wakefield data. In Bengaluru, the absorption by e-commerce firms rose to 622,811 sq ft from 453,495 sq ft a year earlier. Hyderabad more than doubled the take-up to 8,542 sq ft from 4,100 sq ft the previous year. Mumbai grew from no absorption in 2013 to 27,000 sq ft in 2014. Similarly, Kolkata showed signs of an e-commerce buzz, with an absorption of 4,600 sq ft in 2014, against nothing a year before.

In spite of growth shown in many cities, e-commerce companies' total absorption across eight cities in Grade-A localities went up marginally to 1.26 million sq ft in 2014 (from 1.24 million sq ft in 2013), primarily because of the Chennai office space take-up declining. From 690,800 sq ft in 2013, the absorption by e-commerce companies in Chennai dropped to 31,150 sq ft last year. The e-commerce real estate take-up is still a small portion of the overall office pie - in 2014, the total Grade-A office space absorption across eight major cities grew to 29.5 million sq ft from 22.2 million sq ft the previous year. The projection is 36.8 million sq ft for 2015 and 40.1 million sq ft for 2016, data show.

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