Thursday, 16 April 2015

Realty check: E-commerce outfits are grabbing premium office space in cities

Amazon, Flipkart, Snapdeal, Jabong, Ola sewing up deals as operations expand.

E-commerce firms are the new kids on the block for marquee properties at key locations in major cities. This segment till recently used to be the preserve of global multinationals.

Realty industry watchers say that demand for office space is picking up thanks to the rising demand from large e-commerce players and start-ups. Corporates in expansion mode are also coming back.

Most of the action is in Bengaluru, Gurgaon and Mumbai though the trend is seen in other Tier 1 and even in Tier 2 cities.

E-commerce companies Amazon and Flipkart have already built up a bank of office space as they scale up.

E-brigade to the fore:
Amazon is understood to have inked a deal to lease 1.3 million sq ft of prime office space in Bengaluru, while Flipkart last year cut a deal with the Embassy Group. Jabong has leased 1.2 lakh sq ft in Gurgaon and Snapdeal 1.1 sq ft in Delhi. Taxi aggregator Ola Cabs has signed up for 20,000 sq ft of prime office space at Embassy Golf and for 1.5 lakh sq feet in Mumbai’s Powai area.

“Overall business sentiment has improved with the office market seeing significant activity in the second half of 2014. Companies have begun implementing their plans with greater confidence, leading to improvement in demand for office space. We believe that demand for office space will remain robust for the next two years,” said Sanjay Dutt, Executive MD, Cushman & Wakefield.

E-commerce companies are scrambling to pick up space to accommodate their burgeoning workforce and the backend operations.

According to another real estate consultant CBRE, more than 8 million sq ft of office space was completed across key cities during the first quarter of 2015. More than 50 per cent of the new office space supply was in the Delhi National Capital Region.

According to CBRE’s India Office Market View, the total office space taken up in Q1 of 2015 stood at more than 5 million sq ft.

Anshuman Magazine, Chairman and Managing Director, CBRE, said, “The demand for prime office space is expected to pick up in the coming months as companies implement their business plans across cities.

“The quantum of pre-commitments made during the first quarter is likely to boost space take-up. An emerging trend likely to gain momentum is that of cities such as Chennai and Hyderabad attracting demand for bespoke real estate solutions from large corporates.

CBRE said that in line with trends observed during the second half of 2014, the first three months of 2015 saw the completion of a number of large office projects in the Delhi NCR, Mumbai, Bangalore, Hyderabad and Pune.

According to industry observers, PEs are also eyeing Grade A office properties to invest in as sentiment improves. “The investment size has gone up and more funds are coming into commercial office space as corporates expand. We are optimistic about the office space category,” said Ashish Singh, MD (Real Estate Investments), Standard Chartered Private Equity Advisory.

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