Ecommerce, tech companies are the biggest lessors of office space


July 29, 2015

Ravi Teja Sharma & Rasul Bailay, The Economic Times
New Delhi , 29 July 2015

Riding on the back of humongous investments and rising valuations, ecommerce companies and technology startups outpaced IT/ITeS firms for the first time as the biggest office space taker in the country in the first half of the year.
Companies in this segment leased more than 6 million square feet of office space, or over 35% of the total, according to property research firm Knight Frank. Flipkart leased 3 million sq. ft. in Bengaluru with Embassy Office Parks, Amazon took 1.3 million sq. ft. in Bengaluru, Snapdeal 5 lakh sq. ft. in Gurgaon, 1.5 lakh sq. ft. in Mumbai and Zomato recently leased 1.2 lakh sq. ft. in Gurgaon.
"The difference between startups of 1999-2000 dotcom boom and now is that this time these startups have raised large sums and business is actually happening. This is propping up the commercial office space market in India at the moment," said Viral Desai, national director – office agency at Knight Frank India.

The ecommerce industry has attracted large amounts of funding over the past few years. Funding in the sector increased to $4.3 billion in 2014 from $800 million in 2013. In the January-June 2015 period, investors have already put in $1.8 billion in ecommerce companies.

Flipkart has so far raised $3.4 billion in the eight years since it was formed, with the latest $700 million infusion valuing it at $15 billion. Amazon is readying a $5 billion war chest for its Indian operations.

Desai said Bengaluru and Gurgaon are where the most action is from these ecommerce and tech startups.

The money raised by ecommerce companies has been deployed essentially in two places, marketing and backend infrastructure, which includes people, said Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.

"A lot of them have widened their product portfolio and deepened the markets access and their businesses have grown tremendously. So while we may say it is a technology-based business, the execution of the business is dependent on people to a large extent, in terms of product sourcing and in terms of vendor management, supply chain, customer support, etc. With that growth in the team, it is very natural, and it is also an indication of what they expect in terms of future growth," he said.

(Published in The Economic Times.)