A slowdown in the flow of easy money to e-commerce sector has started to impact the office market in Bengaluru. Online marketplaces, which led the office market growth in the IT city, accounting for a fourth of total space leased last year, have slowed down considerably.
Going by the current indications, the leasing of office space by e-commerce players will be less than half of last year. In 2015, the e-commerce sector leased out around 3.2 million square feet out of 13 million sq ft. Although a couple of transactions have taken place during the first five months of this year, there have been no major transactions, according to industry analysts.
The office market is estimated to grow 24% year-on-year to 17 million sq ft in Bengaluru this year. The share of e-commerce sector is expected to be less than 10%, while IT/ITeS sector continue to account for a lion’s share followed by telecom and BFSI sectors, analysts tracking the sector told FE.
“I don’t think the e-commerce sector would be a major driver of office market in Bengaluru this year. We can expect, by end of the year, the leasing of office space by the sector to be in the range of 1.5 million square feet. No major transactions have taken place so far this year,” said, Abhishek Goenka, Partner, Tax and Regulatory Services, PricewaterhouseCoopers. However, he added that this is not a sign of slowdown yet.
Agreeing with him Sanjay Dutt, managing director, Cushman & Wakefield, a global commercial real estate services provider, said Bengaluru is unlikely to witness large office space leasing transactions from the e-commerce sector this year. It will be far less than last year’s level. “Even last year, it was projected at 3 million sq ft, but the net absorption was much less than that. We have done some transactions during the first quarter of 2016, which cannot be disclosed at this stage,” he said.
In 2015, e-commerce giant Amazon and homegrown online retailer Flipkart together accounted for around 24% of total leasing of office space at 3.2 million sq ft pre-committed built-to-suit office space in Bengaluru.
Amazon India said it is expanding rapidly in Bengaluru and recently opened a new office in the city’s IT Corridor. It is adding around 5,000 new jobs in Bengaluru. Earlier this month, the company opened its second office spread over 500,000 square feet located at Bagmane Constellation Business Park on Marathahalli Outer Ring Road in the eastern suburb of the city. Its third office is currently under development and is expected to be operational later this year. Together, these two offices will have a total 1.2 million square feet space.
Currently, Amazon is operating out of World Trade Centre (WTC) in Yeshwantpur, where it has taken close to 700,000 sq ft space. “In line with our mission of building Amazon as Earth’s most customer-centric company, we are scaling at a rapid pace in India and providing direct and indirect employment to men and women across the country,” an Amazon spokesperson said.