Gen Z Drives Commercial Real Estate Boom in Tier II-III Indian Cities
Real estate developers in India are ramping up projects in Tier II and III cities to cater to the demands of Gen Z. These regions are witnessing a surge in modern amenities and tech-enabled workspaces, driven by infrastructure development and a skilled workforce.
Gen ZCommercial Real EstateTier Ii CitiesTier Iii CitiesReal Estate DevelopmentReal Estate NewsMay 25, 2025
Luxury cafes, fine dining restaurants, gaming centres, salons, malls, and exhibition centres are booming in tier II and tier III cities, with the growing demand for such amenities. Real estate players are cashing in on these opportunities.
The commercial real estate sector is undergoing a generational transformation, as the baton passes from baby boomers, Gen X, and millennials to the tech-savvy, environmentally conscious, and entrepreneurial Gen Z. The real estate players are closely monitoring the lifestyle of Gen Zs, the term coined for those individuals who were born between 1997 and 2012, as the demands of this generation are different from other generations.
'Gen Z culture is far more mature today. Thanks to the world of technology, we are far more mature. Today, the youth of Punjab, apart from good families, think that even in the middle-income group, the children are studying all across India and the world. They're coming back, and they have huge aspirations. Their lives, if you come and see, are really world-class,' said Adish Oswal, CMD, Oswal Group. His Vardhman Amrante group recently announced it would invest Rs 1,350 Crores in Punjab's real estate, focusing on Ludhiana and other cities. The investment will be distributed across multiple real estate segments, including commercial, residential, hospitality, industrial, and other allied sectors.
Observing the trends in non-metro cities, Santosh Agarwal, Executive Director and CFO at Alpha Corp, said, 'Gen Z is reshaping the commercial real estate landscape, particularly in Tier 2 and 3 cities like Amritsar, Karnal, and Meerut. These emerging hubs are benefiting from better infrastructure, enhanced connectivity, and a growing appetite for modern, tech-enabled workspaces.'
According to the India Brand Equity Foundation (IBEF), the real estate sector shows promise with a projected 9.2 per cent CAGR from 2023 to 2028. Shrinivas Rao, FRICS, CEO, Vestian, said that regional developers have ramped up activity in these emerging locations, delivering customised commercial assets that meet the evolving needs of the new workforce.
'Simultaneously, leading Grade-A developers from Tier-1 cities have expanded into non-metros to tap into this growing demand and strengthen their presence in these high-potential markets,' he added. The demand for office space in Tier II and III cities is propelled by decentralised work models, infrastructure development, and the availability of a skilled workforce.
Approximately 15 per cent of India's tech talent currently resides in these smaller cities, highlighting thexir growing role in the talent landscape. Vimal Nadar, National Director & Head, Research at Colliers India, says that the growth of startups in Tier II cities has further boosted commercial real estate demand.
'Recognising the inherent growth potential, leading real estate developers are increasingly venturing into Tier II and III cities with high-quality offerings across asset classes, including commercial real estate,' he added. Nadar further added that these smaller cities are likely to become the next growth engines for India's office market and supplement the established Tier I markets.
Frequently Asked Questions
What is driving the demand for commercial real estate in Tier II and III cities?
The demand is driven by the aspirations of Gen Z, infrastructure development, enhanced connectivity, and the availability of a skilled workforce. Additionally, the growth of startups in these cities is boosting the commercial real estate market.
How are real estate developers adapting to the needs of Gen Z?
Developers are investing in modern amenities, tech-enabled workspaces, and luxury facilities such as cafes, fine dining restaurants, gaming centres, and exhibition centres to cater to the lifestyle and demands of Gen Z.
What is the projected growth rate of the real estate sector in India?
The India Brand Equity Foundation (IBEF) projects a 9.2 per cent CAGR for the real estate sector from 2023 to 2028.
Which cities are seeing a significant increase in commercial real estate development?
Cities like Ludhiana, Amritsar, Karnal, and Meerut are witnessing a surge in commercial real estate projects, driven by the growing demand from Gen Z and the availability of a skilled workforce.
How are leading Grade-A developers from Tier-1 cities contributing to this trend?
Leading Grade-A developers from Tier-1 cities are expanding into Tier II and III cities to tap into the growing demand and strengthen their presence in these high-potential markets, delivering high-quality commercial assets.
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