Tier II cities would continue to play a vital role in the country’s growth story, as these cities are poised to be the new growth vectors in India in the coming years - driven by their progress in the real estate landscape, work environment, quality of life, and sustainability.
As per the latest CBRE research report, ‘Tier II cities: Coming of Age’, these cities are large talent bases, and taking offices closer to talent holds the potential to be alternative centers of growth, fueling innovation and growth for office occupiers. Hence, it is increasingly critical for these cities to sustain the current pace of infrastructure development and strengthen skill development.
The widening economic base and access to a skilled talent pool are prime influencing factors for occupiers to consider expanding in Tier II cities.
The various business clusters across Tier II cities offer a mix of non-SEZ and SEZ establishments with average quoted rentals ranging from as low as Rs 30-40 per square foot per month to about Rs 60-80 per square foot per month. Most cities have also recorded a growing presence of flexible space operators, industrial hubs, and malls.
According to the report, the quality of life in these cities is well supported by the relatively affordable cost of living compared to Tier I cities, along with an increasing presence of healthcare facilities and educational institutions. There is also rising investor interest over recent years, with various plans announced by domestic and global firms to establish their footprint in these markets.
“The implementation of focused policy reforms and strategic infrastructure initiatives by the state or central government has resulted in consumer preference leaning towards suburbs or smaller cities. This is evidenced by the entry and expansion of flex operators and the increasing footprint of industrial establishments,” said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.
He further added, “The growing urban sprawl is likely to spread beyond Tier I cities so that Tier II cities take on the mantle of the future. Recognizing this need, the government started undertaking measures to plug in the prevailing infrastructure per business gaps that would boost the development of these cities.”
“Major Tier II cities are key to the imminent real estate boom, now boast of flourishing central and secondary business districts, with some even having established peripheral business clusters. Prominent developers are now making a beeline for these cities, propelled by demand from domestic and global corporates, flexible space providers, start-ups, ed technology firms, etc.,” commented Ram Chandnani, Managing Director-Advisory, and Transactions Services, CBRE India.
Retail Market in top Tier II cities:
Most Tier II cities have recorded a growing presence of domestic as well as global brands across various categories
- With an increasing focus on the expansion of metro, rail, and road networks, airports, and developing commercial clusters, the residential sector too is booming in these cities as the dream of owning a house, is now becoming a reality in these locations. As a result, retailers and mall developers are looking to leverage the buying power of the increasing populace in these cities. Growing internet usage has whetted the appetite for quality products in these areas, thus giving a fillip to e-commerce too.
- Most Tier II cities have established high-street locations with a few having emerging ones as well. Well surrounded by residential catchments, these shopping destinations cater to a wide audience providing a diverse mix of brands across athleisure, fashion and apparel, F&B, department stores, hypermarkets, fine dining restaurants, car showrooms, and electronics.
- Each of these cities also houses malls by some key developers with a varied presence of brands across different categories. The central business district across these cities and their peripheral locations is the most preferred choice for these developments.
- Nexus Elante Mall houses several prominent global and domestic brands
- Key micro-markets of Chandigarh are at numerous locations and also house Dhillon Plaza - an organized retail high street that includes athleisure, hypermarkets, multiplex, fashion & apparel brands, along with drive-through QSR formats
- Average rentals start from Rs 100-200 per square foot per month for mall clusters(MC) and Rs 100-150 per square foot per month for the high street.
- Key retail micro markets in Jaipur include Malviya Nagar, C-Scheme, M.I. Road, and Vaishali Nagar.
- Average rentals in some of these micro-markets start from Rs 175-250 per square foot per month for MC and Rs 150-250 per square foot per month for HS
- Key brands present in the city include Zara, FabIndia, Shopper Stop, Mother Care, Marks & Spencer, Starbucks, Mango, Forest Essentials, etc.
- Key malls in the city are World Trade Park Mall and Triton Mall
- In February 2022, BlueStone.com launched a jewelry manufacturing unit in Jaipur with a capacity to process over 250 kilograms of gold per month
- In December 2021, Biba opened its 300th store in the country in Jaipur
- Key retail micro markets in Lucknow are Gomti Nagar, Hazratganj, and Ashiyana & Alambagh
- Average rentals in these micro markets start from Rs 90-150 per square foot per month for MC and Rs 90-110 per square foot per month for HS
- Key brands present in the city include Uniqlo, Decathlon, Lulu Hyper, Shopper Stop, Spencer, PVR, The White Crow, Skechers, Nike, Croma, etc.
- In July 2022, Lulu Group opened its first mall in North India in Lucknow
- Key retail micro-markets in the city are Central Coimbatore: Peelamedu, RS Puram, Cross Cut Road: Peelamedu, Saravanapatti, West Coimbatore, and Thudiyalur - Mettupalayam Road
- Average rentals in these micro markets start from Rs 140-160 per square foot per month for MC and Rs 90-110 per square foot per month for HS
- Owing to the presence of several tech companies in West Coimbatore, the zone of Avinashi Road and Peelamedu houses many F&B outlets along with fashion & apparel brands
- Key retail micro-markets in the city are M G Road, Marine Drive, Vytilla Bypass and Kakkanad
- Broadway – a prime high street is located at Marine Drive
- Average rentals in these micro markets start from Rs 200-300 per square foot per month for MC and Rs 80-100 per square foot per month for HS
- Key brands present in the city include Cinepolis, Tanishq, Kalyan Jewellers, Malabar Gold, Raymond, McDonalds Allen Solly, Pothys, Seemati, etc. and key malls are Lulu Mall and Oberon Mall
- Key retail micro-markets in the city are MG Road, Pattom Kesavadasapuram, and Trivandrum Bypass
- Mall of Travancore and Lulu Mall is the key prominent malls in the city
- Average rentals in these micro markets start from Rs 250-350 per square foot per month for MC and Rs 80-100 per square foot per month for HS
- Key brands present in the city include ShoppersStop, Carnival Cinema, Pizza Hut, KFC, Domino’s, Reliance Trends, Max, etc.
- Key retail micro-markets in the city are Central, South, and North Vizag
- Central Vizag houses few prominent high streets and is dominated by fashion & apparel brands
- Average rentals for HS start from Rs 100-120 per square foot per month
- Key brands in the city include Westside, ShoppersStop, Pantaloons, BlueStone, Superdry, Tommy Hilfiger, Puma, Nike, Levi's, Croma, Lifestyle, Zudio, Raymond, etc.
- In July 2022, K Raheja Corp leased 17 acres of land at Saligramapuram to set up a new mall in Visakhapatnam; the lease agreement was signed with the port authorities for Rs 125 crore
- Key retail micro-markets in the city are Central, East, West, and North Ahmedabad
- Central Ahmedabad - Navrangpura, Vastrapur, has prominent high streets in Gujarat, well-known for ethnic fashion and apparel players
- Key brands in the city include Tanishq, Manyavar, Jade Blue, Fabindia, Bestsellers, Nike, Puma, Adidas, Decathlon, Aditya Birla Brands, Marks & Spencer, H&M, Lifestyle, ShoppersStop, Westside, Cinepolis, Fun City, Aldo, Charles & Keith, Rolex, Sephora, Armani exchange, etc.
- Average rentals start from Rs 200-300 per square foot per month for MC and Rs 150-200 per square foot per month for HS
- In June 2022, Phoenix Mills announced plans to open its new mall Phoenix Palladium in Ahmedabad before the end of the year. Similarly, Lulu Group announced plans to expand its mall portfolio in India by setting up a new mall in Ahmedabad.
- Key retail micro-markets include AB Road, Central Indore, and Sapna Sangeeta
- Key brands present in the city are Westside, Pantaloons, The White Crow, Bluestone, Tanishq, Tasva, Farzi Café, H&M, Fab India, Starbucks, Croma, Zudio, Inox, Hamleys, MORE, etc.
- Average rentals start from Rs 100 – 200 per square foot per month for MC and Rs 100 – 200 per square foot per month for HS
- In April 2022, Aditya Birla Fashion’s TASVA launched its maiden brand outlet in Indore
- Key retail micro-markets in the city are Central: Janpath Road, East: Cuttack Puri Road – Rasulgarh, NH 5, West: Patrapada, North: Patia Road, and South: Kalpana Square
- Key brands present in the city are Pantaloons, Westside, H&M, Tanishq, Carat Lane, Kalyan Jewellers, Malabar Gold, Joyalukkas, Inox, KFC, MP Jewellers, Khimji Jewellers, etc.
- Average rentals start from Rs 100-250 per square foot per month for MC and Rs 150-200 per square foot per month for HS
- In April 2022, Big Basket announced its expansion plans in Bhubaneswar. The company has declared plans to increase its revenue from Rs 1.6 crore per month until Q1 2022 to Rs 5 crore per month by end of 2021.