Amazon deal puts buzz into Bengaluru office rentals

By: and |
Mumbai | Updated: January 22, 2015 1:44:51 AM

With American e-commerce giant Amazon near a deal to lease 1.3 million square feet of prime office space in Bagmane World Tech Centre...

Amazon, Amazon house rental, Bangalore house rental, Flipkart house rentalFor Amazon, the bill is close to R55 per sq ft per month for a bare-bone office; should the company want top-end furnishing, the tab could go up by an additional R20 to R40 per sq ft per month. (Reuters)

With American e-commerce giant Amazon near a deal to lease 1.3 million square feet of prime office space in Bagmane World Tech Centre in Bengaluru at an estimated annual rent of R85 crore, office rentals in the garden city are tipped to rise.

For Amazon, the bill is close to R55 per sq ft per month for a bare-bone office; should the company want top-end furnishing, the tab could go up by an additional R20 to R40 per sq ft per month.

Anshul Jain, CEO, DTZ India, believes that rents in the southern city could go up by 10-20% in the next six to nine months. “Rents are already firming up given there’s a fair amount of demand coming in,” Jain told FE. However, he also pointed out that supply was catching up with developers having kicked off projects.

Amazon-Flipkart

Amazon has shortlisted the project to house its back-end operations and the lease is expected to be signed in a couple of days. The e-retailer did not respond to a query sent by FE. Sources said Amazon’s negotiations with the Embassy Group and Brigade Enterprises fell through because the e-retailer felt the Bagmane property was more suitable for its needs.

This deal comes close on the heels of the largest leasing deal signed by rival Flipkart last October — the company had signed up 3 million sq ft in Embassy Tech Village for Rs 300 crore at Rs 90 per sq ft for fully furnished space.

Since mid 2013, leading e-commerce players have been among the leading customers for commercial real estate developers in Bengaluru. Indeed, the city saw the bulk of the use of office space last year. Ramesh Nair, COO, business, JLL India, pointed out that the city was the highest contributor to office space absorptions in 2014, growing 72% to nearly 10 million sq ft. “The IT-ITeS and e-commerce sectors have contributed significantly to the growth of office space demand,” Nair observed.

Motilal Oswal estimates the e-commerce industry will create 50,000 jobs in the next three years, driving up demand for office space. The two transactions by Amazon and Flipkart have seen more than 4 million sq ft being taken up in just three months. Flipkart is understood to be looking to add another 2 million sq ft, prompting analysts to project even higher demand for office space.

Realty bites:

* To lease 1.3 m square feet of office space in Bagmane World Tech Centre in Bengaluru
* Amazon to house back-end operations in the space
* Estimated annual rent will be R85 cr, close to R55 per sq ft per month for bare-bone office

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