Realty check for slowing e-commerce sector

The latest indicator that e-commerce is in the slow lane has come from the real estate space. According to real estate consultant Knight Frank India, the sector, which commanded almost a fourth of total commercial real estate space leasing last year, has slipped significantly.

The e-commerce sector's usage of commercial spaces was about 4.2 million square feet of the total of 17.5 million sq ft consumed in the first half of 2015. However, in the same period this year, it has gone down to just 0.9 million sqft of the overall consumption of 20 million sqft, the report from Knight Frank said.

"While overall space take up of commercial real estate has increased, the contrary has happened in the e-commerce sector. Right now, investors as well as start-up owners are wary of investing more in the space. So start-ups that planned to take up more space this year have not gone ahead with the plan," said Viral Desai, national director, Occupier Solutions Group, Knight Frank. "As you look at the emerging trend it will be this way for the sector for the whole of the year," he added.

GLOOMY CONDITIONS

• Real estate usage by e-comm firms down to 0.9 mn sqft in H1 2016 from 4.2 mn a year ago
  

 

Overall unsold inventory levels drop 7%
 

Average rents up 8%
 

12% growth in volumes in H1 2016

In India, Mumbai, Delhi, Bengaluru and now Hyderabad are some of the places where most e-commerce companies have set up base.

According to the report, "India Real Estate Residential and Office", the first half of 2016 witnessed a 12 per cent growth in the transaction volume across the top six cities.

"Rental values have continued to maintain their upward movement in most cities, as average rents shot up by eight per cent year-on-year in H1 2016. This jump was led by cities such as NCR, Pune and Bengaluru, where rents have moved up in the range of 10-14 per cent y-o-y," the report says.

However, according to report, as far as more companies setting up base is concerned, the National Capital Region has seen a decline as the supply of quality commercial real estate has declined.

"The H1 2016 research shows that the unsold inventory levels have dropped by seven per cent y-o-y, thus bringing some cheer to developers. Although Mumbai, Bengaluru and Ahmedabad have shown positive growth, NCR with its dismal performance still remains a concern," Shishir Baijal, chairman and managing director, Knight Frank India.

Desai further said that supply in NCR is diminishing and it is clearly evident in specific pockets.

According to the report, the office market in NCR saw vacancy levels hover around 20.6 per cent, and new completions were at an all-time low. While IT/ITeS sector used to be the major occupier of office space in NCR, the manufacturing sector has seen a two-fold jump in transacted space in H1 2016 against the same period last year.

Vacancy levels in office space in the top six cities fell marginally from 17 per cent in H1 2015 to around 15 per cent in 2016, the report said.