78% drop in space take-up by e-commerce firms this year
There are very few e-commerce companies looking at taking up fresh office space this year. The biggest indicator has been that hiring in campuses has been slow and space requirement for expansion plans is absentreal estate Updated: Jul 12, 2016 19:58 IST
With many start-ups deciding to go slow on hiring and funding drying up substantially, there has been a 78% drop in space being leased by e-commerce companies this year. E-commerce firms took up about 4.2 million square feet of the total of 17.5 million sq ft space in the first half of 2015. However, in the same period this year, it consumed only about 0.9 million sq ft of the overall consumption of 20 million sq ft, a Knight Frank report has said.
“There are very few e-commerce companies looking at taking up fresh office space this year. The biggest indicator has been that hiring in campuses has been slow and space requirement for expansion plans is absent. Most companies that had made a pre-commitment to take up more office space this year have not exercised that option, hiring too is slow and funds have dried up substantially,” says Viral Desai, national director, Occupier Solutions Group, Knight Frank.
The other services sector drove the office space demand in NCR during the first half of 2016, backed by demand from consulting and e-commerce companies such as UrbanClap, Cheil, Oyo Rooms, McKinsey and Bechtel. Urbanclap took up 35,000 sq ft of space, Policy Bazaar about 10,000 sq ft, Oyo Rooms around 30,600 sq ft and OLX around 8,000 sq ft - all in Gurgaon. These volumes, however, were substantially lower than last year when Snapdeal alone picked up around 5 lakh sq ft.
In terms of leasing, NCR saw a total of 3.5 mn sq ft of office space transactions in the first half of 2016, registering a 5% drop compared to the same period in 2015. The share of IT/ITeS decreased considerably. “NCR is no longer an IT-dominated market but a diversified market,” says Desai.
In Bengaluru, the share of the other services sector, of which the e-commerce sector is a part, has dropped from 36% in the first half of 2015 to 30% in the first half of 2016. Booking.com took up 6,000 sq ft of space in Murphy Road, Tiny Owl leased around 5,000 sq ft in the Madiwala area and Groupon took up 20,000 sq ft in the Whitefield area.
The IT/ITeS sector—the key demand driver of the city’s office market, the share of which in absorption had fairly lessened in the first half of 2015—strove to maintain its resurgent stance in the first half of 2016. The sector accounted for 58% of the total absorption in the first half of 2016, as compared to the first half of 2015, which had seen a 50% share. This could be attributed to the large-size deals transacted by IT majors such as TCS (550,000 sq ft), HP India (400,000 sq ft) and Google (100,145 sq ft), among others.
In Mumbai, the other services sector, comprising consulting, media and e-commerce firms, recorded the largest deal share and the total number of deals recorded a 200% jump to 251 deals in the city. Suburban business district West, with localities such as Andheri–Kurla, Goregaon and Malad, recorded the highest number of transactions. Media, consulting and e-commerce firms preferred this market for setting up office. E-commerce firms such as OlaCabs, Justdial, MakeMyTrip and Saavn signed leases in the SBD West market, drawn by the attractive rents and improving connectivity.
The BFSI sector (comprising banking, financial services and insurance sector) and consulting media sectors—the traditional demand drivers of office space in the city—took up more space but it was the push from the IT/ITeS and manufacturing sectors that strengthened the city’s demand growth, the report says.