Reeling under losses and strapped for cash, e-retailer Snapdeal is the latest in the sector to be giving up office space as it pares operations.
Reeling under losses and strapped for cash, e-retailer Snapdeal is the latest in the sector to be giving up office space as it pares operations. Over the past year, the absorption of office space by the e-commerce segment dropped by 60%, data sourced from Cushman & Wakefield revealed. Sources familiar with the development told FE that Snapdeal has initiated negotiations with Delhi-based ASF Infrastructure to surrender a part of its sprawling, 0.5 million sq feet office in Gurgaon. The company did not respond to an email query by FE with regard to downsizing its office space till the time of going to press.
Rajeev Bairathi, ED, Knight Frank India, believes the space vacated by e-commerce players won’t be filled soon. “It’s not an automatic process,” Bairathi said pointing out that while in Bengaluru, the IT sector might occupy some of the space, in other markets they could remain empty.
With losses in the e-commerce sector piling up and business not as brisk as anticipated, several e-commerce firms have scaled down their office space over the past 12 months. The number of deals has dropped by about 70%, said Anshul Jain, managing director, Cushman & Wakefield, pointing out growth had been slower than expected. While the industry grew at 180% to $13 billion in 2015, the growth in 2016 was a paltry 12% in 2016 to $14.5 billion although internet penetration improved to about 40%.
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Last month, Snapdeal said it has laid off 600 employees. Indications are that it will soon bring down its employee strength to below 1,000 from the current 2,500. Its promoters also announced that they will not be drawing a salary for an indefinite period of time.
The company had signed the real estate deal two years ago for a whopping R250 crore to house its 4,000 employees, making it one of the largest leasing deals in the office leasing space. The contract was to be renewed after five years.
Snapdeal reported a net loss of nearly R3,000 crore in FY16 on a revenue of R1,506.8 crore, according to regulatory filings.
In late 2014, Flipkart signed the largest leasing deal in the country, agreeing to pay R300 crore and occupy 3 million sq ft, but over time, it surrendered about half of it, Embassy Developers confirmed.
Loss-making e-retail portal Jabong as well as troubled Yahoo are understood to have vacated their Bangalore-based outfits last year. More recently, online food ordering and delivery services portal
Zomato downsized its office space in Delhi, whereas a similar churn was witnessed in Housing.com’s Hiranandani office in Mumbai.
US-based e-commerce major eBay, is believed to have shelved its plans to wheel into Bandra Kurla Complex (BKC), currently one of the most expensive and upmarket office destinations in the country. Another firm too had committed to lease office space but after six months shied away from closing out the transaction, Navin Makhija, CEO at Wadhwa Developers, which owns projects in Mumbai’s corporate business district BKC told FE.