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Slowdown in e-commerce office leasing activity

Update On :24 August 2016

Slowdown in e-commerce office leasing activity

E-commerce companies in India has economized large office space in cities by practically reducing their commercial real estate transactions. According to real estate services firm CBRE, the share of e-commerce companies had dropped from 9% in H1 2015 to 5% in H12016 which means it has fallen by almost half in the first half of this year as compared to the same period last year.

Ram Chandnani, MD — Advisory & Transaction Services CBRE South Asia said that e-commerce office leasing activity has witnessed a slowdown over the past few years as most e-commerce firms have fulfilled most of their operation/expansion requirements except few. For space and cost efficiency, several e-commerce startups are either consolidating or are shedding office space they might or have leased in the industry's dramatic growth phase.

Surabhi Arora, senior associate director, research at Colliers India said that the primary demand driver for office sector is IT-ITeS and e-commerce is only a small part of it. Thus the overall absorption is not likely to impact much. The start-ups and e-commerce companies are taking a cautious approach in leasing out large office spaces.

Last year, e-commerce companies buzzed because of big lease transactions by companies like Flipkart, Myntra and Amazon. However, majority of the startups are now incorporating corporate real estate strategies such as consolidation, expansion and focus on peripheral locations to save cost. Industry experts say a company can save as much as 25% on its operational costs by rationalizing office space.

Pankaj Jain joint managing director Realistic Realtors, a Gurgaon-headquartered brokerage said that they have seen demand from e-commerce companies drop by 50% in the last one year as there is a major shakeup in the segment. Property consultants say the pace of consolidation of office space by e-commerce companies will be faster than the rate at which these companies entered the market as many of them look for stronger partners to achieve growth.

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Image Courtesy : BCCL 2016

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