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E-commerce companies put realty plans on the back burner

The consolidation among e-commerce players in India has seen companies rationalising or scrimping on large office space in cities practically halving their commercial real estate transactions.
The share of the e-commerce sector has fallen by almost half in the first half of this year as compared to the same period last year. According to real estate services firm CBRE, the share of e-commerce companies had dropped from 9% in H1 2015 to 5% in H12016.
“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,” barring a few exceptions said Ram Chandnani, MD — Advisory & Transaction Services CBRE South Asia.
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.
“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,” said Surabhi Arora, senior associate director, research at Colliers India.
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.
Recently, Quikr shut down Commonfloor office in Bangalore after its acquisition early this year. Last year, Snapdeal consolidated several of its offices in the NCR into one central office of 4.5 lakh sq ft in Gurgaon’s Udyog Vihar. Zomato and Jabong and Housing.com — consolidated their office spaces in Gurgaon and Mumbai.
Flipkart also signed a 2 million sq ft built-to-suit office deal with Embassy group in Bengaluru of which the first phase of 1.5 million sq ft will be delivered by 2017. Flipkart will use this space to bring its several offices across Bengaluru under one roof.
“We have seen demand from e-commerce companies drop by 50% in the last one year as there is a major shakeup in the segment,” said Pankaj Jain joint managing director Realistic Realtos, a Gurgaon-headquartered brokerage.
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.