Space rented by e-commerce players in Bengaluru fell a steep 95% to 1,40,000 sq ft in the first half of 2016 over the same period last year. Just four transactions were reported with online travel portal MakeMyTrip and online bus tickets platform redBus being the two companies that leased out office space, according to Knight Frank India.
In the first six months of 2015, the e-commerce sector accounted for 3.25 million sq ft or about 53% of the total office space transacted in Bengaluru; this year the share is less than 3%.
This year, the city’s office market clocked a total transaction space of 6.1 million sq ft, levels similar to those seen last year. The demand for office space, this time around was driven primarily by the IT/ITeS sector, which accounted for 58% of the total space.
Satish BN, executive director, South India, Knight Frank told FE that although transactions may be fewer this year, the demand from the e-commerce space has pushed up rents by about 3-5%. “With the government allowing 100% FDI in e-commerce, we expect more transactions from the sector during the second half of this year,” Satish said.
In H1 2016, Bengaluru’s office market witnessed four deals from the e-commerce sector, which leased space between 18,000 sq ft and 50,000 sq ft.
Compared to this, in H1 2015, there were half a dozen transactions from the sector including two large deals from Amazon and Flipkart. While Amazon India committed 1.2 million sq ft, its Indian rival Flipkart committed for 2 million sq ft of built to suit (BTS) office space in the city. However, this space is still under construction and is likely to be absorbed over the next one year. Other four transactions were from Amazon Internet Services (20,000 sq ft), Booking.com (6,000 sq ft), Tiny Owl (5,000 sq ft) and Groupon (20,000 sq ft).
Overall, the share of services such as telecom and media and e-commerce sector has dropped to 30% in H1, 2016 from 36% in the corresponding period last year. Although the IT/ITeS sector took the lead in the share of office space absorption in H1, 2016, e-commerce still holds great potential, Satish said.