25 Million Square Feet of Retail Space Expected to Boost Tier II and III Cities by 2029
India's Tier II and III cities are witnessing a retail real estate boom, with developers planning to introduce 25 million square feet of new retail spaces by 2029. This expansion is driven by rising consumer demand, increased land availability, and a hist
Retail Real EstateTier Ii CitiesTier Iii CitiesJll IndiaRetail ExpansionReal EstateOct 13, 2024
The scale of the new retail supply in these cities is impressive, with an average gross leasable area of around 375,000 square feet. Four of these projects stand out for their sheer size, each boasting more than 1 million square feet of leasable space. This provides an ideal platform for developers to create mid- and large-scale malls that significantly enhance the shopping experience with a diverse tenant mix, further elevating the appeal of these developments to both retailers and consumers.
The increasing confidence among retailers is evident, as more brands—particularly those in the premium and bridge-to-luxury segments—are expanding into Tier II and III cities. Rising consumer aspirations and the availability of high-quality retail spaces are motivating these brands. Notable global retailers have even chosen these cities for their Indian market debuts. For instance, Daiso Japan opened its first store at Elante Mall in Chandigarh, while Charles Tyrwhitt launched its flagship outlet in Palladium Ahmedabad.
Developers have also started acquiring prime land parcels in these emerging cities, with strategic plans to build large retail centers. In some cases, they are creating mixed-use developments that combine retail with food and beverage outlets, offices, and hospitality, thereby enhancing the commercial potential of these projects. This trend underscores the long-term growth potential of retail in smaller cities, as developers aim to create destinations that serve as multi-functional hubs for shoppers and businesses alike.
In addition to developers, institutional investors are increasingly turning their attention to Tier II and III cities. While the top seven metropolitan areas—Delhi NCR, Mumbai, Pune, Bengaluru, Chennai, Kolkata, and Hyderabad—remain the main focus of retail investment, a substantial portion of institutional assets, accounting for roughly 30%, is now located in smaller urban centers. These cities, including Chandigarh, Mysuru, Indore, and Surat, offer significant potential for growth, as lower land costs and growing consumer demand attract both developers and investors.
The evolution of the retail landscape in India's Tier II and III cities is transforming the real estate sector. Developers and institutional investors are responding to the changing aspirations of consumers in these regions by creating large-scale shopping malls that house a diverse array of national and international brands. As more premium retail spaces emerge, retailers are confidently entering these markets, fueling the rapid expansion of retail across India's growing cities.
Frequently Asked Questions
What is the expected growth in retail space in India's Tier II and III cities?
Developers are expected to deliver 25 million square feet of new retail spaces in India's Tier II and III cities by 2029.
What factors are driving the retail real estate boom in Tier II and III cities?
The growth is driven by rising consumer demand, increased land availability, and a historical lack of high-quality retail infrastructure.
What is the average gross leasable area of new retail projects in these cities?
The average gross leasable area of new retail projects in Tier II and III cities is around 375,000 square feet.
Which notable global retailers have entered Tier II and III cities in India?
Notable global retailers like Daiso Japan and Charles Tyrwhitt have entered Tier II and III cities in India, with Daiso opening its first store at Elante Mall in Chandigarh and Charles Tyrwhitt launching its flagship outlet in Palladium Ahmedabad.
How are developers and investors responding to the changing retail landscape in Tier II and III cities?
Developers and institutional investors are acquiring prime land parcels and creating mixed-use developments that combine retail with food and beverage outlets, offices, and hospitality, enhancing the commercial potential of these projects.
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