Online retailers lead race for commercial real estate
New Delhi/Mumbai: E-commerce companies Amazon India and Flipkart Internet Pvt. Ltd’s search for an extra 600,000 sq.ft of warehousing space in Mumbai and the Max Group’s plan to build what it calls India’s No. 1 corporate office point to increasing action in India’s commercial real estate market.
Amazon India is close to leasing around 400,000 sq.ft of warehousing space at Bhiwandi in Maharashtra while Flipkart is looking to add around 200,000 sq.ft in the same area, two people familiar with the development said on condition of anonymity. Both firms are looking at adding 2 million sq.ft of warehousing space across the country, they said.
Demand for prime office space reached a 10-quarter high of about 11 million sq. ft in the quarter ended September, as per data released on Wednesday by CBRE India, a commercial real estate services and investment firm.
A 29 September report by property consultant Knight Frank projected warehousing requirement of online retail firms to double to 29 million sq.ft in 2020.
“It is the right time to start thinking of making another commercial building. We’d also think whether we should launch one right now or in a few months’ time,” said Aman Gehlot, director, Ambience Group, which has leased Amazon around 88,000 sq. ft of space at Ambience Corporate Park in Gurgaon.
Max Group founder Analjit Singh is planning to enter residential segments with a focus on big mixed-used townships having both office and residential space.
“We are building what I think will be India’s number one corporate office,” Singh said in a recent interview. “It’s Noida, but really Delhi... closer to the precincts of Delhi than to interiors of Noida.”
While Mumbai and the National Capital Region (NCR) centred on Delhi are on the cusp of seeing these big expansion plans kick off. CBRE data shows overall demand for office space in the quarter to 30 September rose 14% from a year ago across nine cities.
Bengaluru saw the highest increase with a 24% rise in leasing followed by Hyderabad with 17%.
The southern cities saw some of the biggest deals in the September quarter, including Tata Consultancy Services Ltd leasing 550,000 sq ft. at ITBP Victor Block in Bengaluru and Cognizant Technology Solutions Corp.’s transaction of 5.2 lakh sq.ft of space at HO4 Avance Business Hub in Hyderabad, according to CBRE.
Information technology (IT) and IT-enabled services firms led office transaction activity, accounting for about 54% of the deal closures.
Financial services, and engineering and manufacturing were other sectors driving demand for office space.
“The year 2015 was a record year —with the segment witnessing the highest ever annual office absorption. With just a few months left till the end of the year, I am optimistic that this number will be met, if not surpassed,” said Anshuman Magazine, chairman, India & South East Asia, CBRE.
Increase in rentals has now moved to relatively smaller markets of Chennai, Hyderabad and Pune, even as bigger markets, such as Bengaluru, continue to post rental growth.
The drive to smaller cities is being by led by e-commerce firms. Apart from Bhiwandi, Flipkart and Amazon are also scouting for warehousing space in Ahmedabad, Chennai, Pune, Hyderabad and Kolkata, said one of the people cited above.
“We are waiting for validation for (festive) sales to come through. Both the firms (Amazon and Flipkart) are rapidly expanding their reach and penetrating into newer markets,” said the person. Queries emailed to Flipkart remained unanswered as of press time.
Last month, Flipkart opened its second warehouse in Uttar Pradesh, spread across 55,000 sq.ft, primarily to cater to the demand of the 2-6 October Big Billion Days sale. At present, the company operates around 18 warehouses across the country.
An Amazon India spokesperson declined to provide details on how the company planned to expand its warehousing space, but said in an email response that it was making “significant investments in building logistics and fulfilment infrastructure in India to provide a fast and reliable delivery”. At present, it operates about 27 fulfilment centres or warehouses with a total area of close to 2.5 million sq.ft.
Amrit Raj in New Delhi contributed to the story.