With fast expanding infrastructure and connectivity , health, educational, hospitality and recreational facilities,growing economic and business base, besides lower cost of living, Tier 2 cities are the new hotspots of commercial real estate.
Tier 2 cities have come of age and according to a latest CBRE report, these 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. These cities have large talent bases and taking offices closer to talent pool holds the potential to be alternative centers of growth, fueling innovation and growth for office occupiers. The widening economic base and access to a skilled talent pool are prime influencing factors for occupiers to consider expanding in Tier 2 cities. The various business clusters across Tier 2 cities offer a mix of non-SEZ and SEZ establishments with average quoted rentals ranging from as low as INR 30-40 per sq. ft. per month to about INR 60-80 per sq. ft. 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 1 cities, along with an increasing presence of healthcare facilities and educational institutions. There is also rising investor interest over recent years, with various domestic and global firms announcing their plans to establish their footprint in these markets.
According to Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE,the implementation of focused policy reforms and strategic infrastructure initiatives by the Centre and state governments has resulted in consumer preference for suburbs and smaller cities. This is evident from the entry and expansion of flex operators and the increasing footprint of industrial establishments.
Major Tier 2 cities, according to Ram Chandani, Managing Director, Advisory & Transactions Services, CBRE India, are key to the imminent real estate boom, having flourishing central and secondary business districts, with some even g establishing peripheral business clusters. Prominent developers are now making a beeline to these cities, propelled by demand from domestic and global corporates, flexible space providers, start-ups, ed technology firms, etc.
Office Market :
According to the report, the talent pool in Tier 2 cities opened a world of opportunities for both global and domestic corporates, as they were no longer constrained by geographical limits. Now that corporates are looking for their workforce to return to office, many of them are also venturing into these Tier 2 cities to be in proximity to the talent. While Tier 1 cities would continue to remain the most preferred choice currently for office occupiers, in the medium- to long-term, there will be rise in office space take-up in Tier 2 cities as well.
Occupiers are further encouraged by the quality infrastructure as well as affordable land cost and lower cost of operations in these locations. While some are leasing office space to set up their operations, others opt for the flexible space option. Chandigarh, Jaipur, Kochi, Ahmedabad, Lucknow, and Indore have more than five flex operators as of H1 2022, while Bhubaneshwar, Visakhapatnam and Thiruvananthapuram and Coimbatore have 2-5 flex operators in the city. Chandigarh, Kochi, Thiruvananthapuram, and Ahmedabad are cities with relatively higher stock as of H1 2022, while cities such as Jaipur, Coimbatore, and Indore have seen a relatively higher spurt in activity in the past six months, both in development completions as well as space take-up.
CBRE’s ‘Cost of Living Index – 2022’ indicates cities such as Kochi and Coimbatore are much more affordable than others. On ‘Health & Wellbeing’ and ‘Education Quality’, most cities either emerged as ‘Front runners’ or ‘Performers’.Innovation and resilient infrastructure are key drivers of economic development. The report highlights cities such as Ahmedabad, Bhubaneswar, Visakhapatnam, and Coimbatore are ‘front runners’ in this regard and most others are ‘aspirants’. A few cities are catching up on ‘Decent Work & Economic Growth’, indicating that heightened focus on job creation would be required in the coming years.Sustainability and climate action have globally become social mores in business circles. The report highlights cities such as Coimbatore, Visakhapatnam, Thiruvananthapuram, Indore, and Chandigarh to be relatively more sustainable.
With an increasing focus on the expansion of metro, rail and road networks, airports and developing commercial clusters , most of tier-II cities have recorded a growing presence of domestic as well as global brands across various categories. As a result, retailers and mall developers are looking to leverage the buying power of the increasing populace in these cities. 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 leisure, fashion & 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 are the most preferred choice for these developments.
Chandigarh along with satellite cities of Mohali and Panchkula ( collectively known as Tricity) has emerged as a retail star among Tier 2 Cities.Nexus Elante Mall, one of the leading malls in Chandigarh houses several prominent global and domestic brands.Key micro-markets of Chandigarh are located at Sector 17 and 35 – Madhya Marg in Chandigarh, Phase 3B – 2, Sector 82, Sector 70, Phase 7 in Mohali and Sector 8, Sector 9 and Sector 20 in Panchkula. The Ambala – Chandigarh Expressway, VIP Road in Zirakpur too is emerging as a micro-market wherein, Cosmo Mall, well-known for its factory outlet stores is located. The micro-market also houses Dhillon Plaza – an organised retail high street that includes athleisure, hypermarkets, multiplex, fashion & apparel brands, along with drive-through QSR formats. Average rentals start from INR 100-200 per sq. ft. per month for mall clusters (MC) and INR 100-150 per sq. ft. per month for high street (HS)
A gateway of tourism in Rajasthan and part of the ‘Golden Triangle Tourist Circuit’, Jaipur has made its mark as a retail destination with Key retail micro markets of Malviya Nagar, C-Scheme, M.I. Road and Vaishali Nagar. The average rentals in some of these micro-markets start from INR 175-250 per sq. ft. per month for MC and INR 150-250 per sq. ft. per month for HS.World Trade Park Mall and Triton Mall are major malls in the city. Key brands present in Jaipur include Zara, FabIndia, Shopper Stop, Mother Care, Marks & Spencer, Starbucks, Mango, Forest Essentials, etc.In December 2021 , Biba opened its 300th store in the country in Jaipur.
Known as the ‘City of Nawabs’, Lucknow is a prominent retail centre of North India with key retail micro markets of Gomti Nagar, Hazratganj and Ashiyana & Alambagh.Average rentals in these micro markets start from INR 90-150 per sq. ft. per month for MC and INR 90-110 per sq. ft. 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
The city well-known as the ‘Manchester of South India’ has key retail micro-markets of Central Coimbatore: Peelamedu, RS Puram, Cross Cut Road: Peelamedu, Saravanapatti, West Coimbatore and Thudiyalur – Metupalayam Road.Average rentals in these micro markets start from INR 140-160 per sq. ft. per month for MC and INR 90-110 per sq. ft. 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.Thudiyalur is an emerging high street in the city which primarily houses fashion & apparel outlets.
The city that includes areas of Fort Kochi, Mattancherry, mainland Ernakulam, the suburbs in the north-east (Edapally, Kalamassery and Kakkanad) and Tripunithura in the south-east, is the second largest urban agglomeration in Kerala and a major commercial destination.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 INR 200-300 per sq. ft. per month for MC and INR 80-100 per sq. ft. per month for HS. Prominent 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
Located at the southern end of the state’s coastal line, Thiruvananthapuram known for its educational institutions, information technology firms, mineral-based industries, commerce and tourism, has several prominent retail micro markets including MG Road, Pattom Kesavadasapuram and Trivandrum Bypass.Mall of Travancore and Lulu Mall are the major malls in the city.Average rentals in these micro markets start from INR 250-350 per sq. ft. per month for MC and INR 80-100 per sq. ft. per month for HS. Key brands present in the city include Shoppers Stop, Carnival Cinema, Pizza Hut, KFC, Domino’s, Reliance Trends, Max, etc.
A commercial hub, Visakhapatnam has leading retail micro-markets of 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 INR 100-120 per sq. ft. per month. Well known brands in the city include Westside, Shoppers Stop, 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.
Known for its excellent infrastructure and pharmaceuticals, textiles, automobile, and technology sectors, the city of Ahmedabad has major retail micro-markets of Central, East, West and North Ahmedabad.Central Ahmedabad – Navrangpura, Vastrapur, has prominent high streets in Gujarat, well-known for ethnic fashion & apparel players.Prominent brands in the city include Tanishq, Manyavar, Jade Blue, Fabindia, Bestsellers, Nike, Puma, Adidas, Decathlon, Aditya Birla Brands, Marks & Spencer, H&M, Lifestyle, Shoppers Stop, Westside, Cinepolis, Fun City, Aldo, Charles & Keith, Rolex, Sephora, Armani exchange, etc. Average rentals start from INR 200-300 per sq. ft. per month for MC and INR 150-200 per sq. ft.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.
The smart city of Indore has key retail micro-markets of AB Road, Central Indore and Sapna Sangeeta. The main 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 INR 100 – 200 per sq. ft. per month for MC and INR 100 – 200 per sq. ft. per month for HS.In April 2022, Aditya Birla Fashion’s TASVA launched its maiden brand outlet in Indore.
It is a prominent retail destination of the East with leading retail micro-markets of Central: Janpath Road, East: Cuttack Puri Road – Rasulgarh, NH 5, West: Patrapada, North: Patia Road and South: Kalpana Square. Eminent 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 INR 100-250 per sq. ft. per month for MC and INR 150-200 per sq. ft. per month for HS.In April 2022, Big Basket announced its expansion plans in Bhubaneswar.