E-commerce is set to drive a commercial real estate boom

21 Oct, 2014

The e-commerce industry may not need retail space, but it may drive the commercial real estate industry by picking up giant warehouses or super-sized corporate offices which can house their large teams comprising customer support, tech, analytics and marketing.

Flipkart last week signed a deal with Embassy Group to build a 3 million sq ft of office space in Bangalore. According to sources, Flipkart initially wanted only 1 million sq ft, but later decided to sign a 10-year lease for 3 million sq ft in the city, because of the anticipated growth in the business. Flipkart is also spending Rs 200 crore on furnishing and fittings alone for this plug-and-play office. The first phase, which will house 2,400 seats, will be delivered by next year.

"We are seeing a steady rise in e-commerce real estate deals. There will be more signings for warehouses in smaller towns," says Nirav Kothari, resident director at Jones Lang LaSalle.

The top five companies in the e-tailing industry together have 30 warehouses totaling about 2.8 million sq ft, as of today, with each warehouse being 80,000 to 100,000 sq ft in size on an average. Over the next three years they will quadruple their warehouse capacity.

The Associated Chambers of Commerce and Industry of India (Assocham) in its report on the "Evolution of the E-commerce Industry" predicts that by 2017 an additional 7 to 15 million sq ft of warehouse space would be added.

Over the next six years the industry's size is predicted to be $20 billion in revenues and hence it will spend 10 per cent of the market value on creating great infrastructure, which will also include warehousing and logistics. Keeping pace with the warehousing is also the office space, where close to 1.5 million sq ft of office space has already been leased by top five e-commerce companies.

(Edited by Joby Puthuparampil Johnson)