Tier 2 and 3 Cities to See Over 25 Million Sq Ft of New Retail Expansion by 2029
While the major cities like Delhi NCR, Mumbai, Pune, Bengaluru, Chennai, Kolkata, and Hyderabad continue to dominate retail real estate investment, Tier 2 and 3 cities are set to witness a significant surge in new retail developments. A recent report by J
Retail ExpansionTier 2 CitiesTier 3 CitiesReal EstateJllReal Estate MumbaiOct 07, 2024
Retail Expansion in Tier 2 and 3 Cities\nAccording to the report, Tier 2 and 3 cities are poised to see an influx of over 25 million sq. ft. of new retail projects by 2029. This surge is driven by several key factors
- Growing Consumer Demand Increasing consumer spending power and rising aspirations in these cities are creating a fertile ground for retail growth.\n- Availability of Land Tier 2 and 3 cities offer ample land at relatively lower costs, making it an attractive market for developers.\n- Lack of Quality Retail Developments Until a few years back, these cities lacked quality retail spaces, but that is quickly changing.
Regional Breakdown\nThe report provides a detailed regional breakdown of the upcoming retail supply
- North India Leads with 44% of the total upcoming mall supply, with key cities like Ludhiana, Jaipur, and Lucknow driving this growth. A diverse mix of established and emerging regional developers are at the forefront.\n- South India Accounts for 30% of the supply, with cities such as Coimbatore, Mallapuram, Thrissur, and Trivandrum leading the way.\n- East India Will see a significant supply of 4.5 million sq. ft., primarily led by Guwahati.\n- West India Major developers are coming up with large-scale, high-quality retail projects in cities like Goa, Surat, and Ahmedabad.
Market Entry of Premium Brands\nPremium and bridge-to-luxury brands are also venturing into these cities, driven by rising consumer aspirations and new opportunities for store openings. Some notable examples include Daiso Japan, which opened its first store at Elante Mall in Chandigarh, and Charles Tyrwhitt, which debuted at Palladium in Ahmedabad.
Scale of Projects\nThe upcoming mall supply in these cities will be of a significant scale, with a projected average gross leasable area of approximately 375,000 sq. ft. Notably, four of these mall projects are particularly large-sized, each having a gross leasable area of 1 million square feet. This expansive reach offers developers the opportunity to create mid-scale and large-scale malls, significantly enhancing tenant mix and shopper experience.
Developer and Investor Confidence\nThe confidence of developers and institutional investors in Tier 2 and 3 cities has grown due to the influx of high-quality supply from established developers. Leading real estate developers have acquired land parcels in strategic locations in these emerging cities, driven by growing consumer demand. For instance, notable cities involved in these acquisitions include Jaipur, Lucknow, and Mohali in the northern region; Ahmedabad and Surat in the west; and Coimbatore in the south.
Mixed-Use Developments\nIn some cases, developers are planning to develop mixed-use projects that will include retail, F&B, offices, and hospitality. This integrated approach aims to create vibrant urban hubs that cater to a wide range of consumer needs.
Institutional Investment\nApart from developers, institutional investors are also focusing on Tier 2 and 3 cities for developing retail projects. While prime metro cities remain the focus of retail real estate investment, a substantial portion of institutionally held assets are now also located in emerging urban centers across India. Over 30% of institutionally held retail assets (approximately 9.12 million sq. ft) are now located across 12 Tier 2 and Tier 3 cities, including Amritsar, Chandigarh, Ludhiana, Udaipur, and Mohali in the North; Mysuru and Mangaluru in the South; Ahmedabad, Surat, Indore, and Nagpur in the West; and Bhubaneswar in the East.
Conclusion\nThe retail real estate landscape is ever-evolving, and Tier 2 and 3 cities are set to play a crucial role in this transformation. With institutional players acquiring assets or partnering for new projects, retailers are venturing with increased confidence, bolstered by the availability of quality and premium-grade malls in these locations. This shift promises to bring a mix of national and international brands to these emerging markets, enhancing the overall retail experience for consumers.
Frequently Asked Questions
What is driving the retail expansion in Tier 2 and 3 cities?
The retail expansion in Tier 2 and 3 cities is driven by growing consumer demand, availability of land at lower costs, and a lack of quality retail developments until a few years back.
Which region leads in the upcoming mall supply in Tier 2 and 3 cities?
North India leads with 44% of the total upcoming mall supply, followed by South India with 30%.
What is the projected average gross leasable area of the upcoming mall projects?
The projected average gross leasable area of the upcoming mall projects in Tier 2 and 3 cities is approximately 375,000 sq. ft.
Who are the key players driving the retail development in these cities?
A diverse mix of established and emerging regional developers, along with institutional investors, are driving the retail development in Tier 2 and 3 cities.
What is the significance of mixed-use developments in these cities?
Mixed-use developments in Tier 2 and 3 cities are significant as they aim to create vibrant urban hubs that cater to a wide range of consumer needs, including retail, F&B, offices, and hospitality.
Related News Articles
Dubai's Residential Market Soars: Springfield Properties Reports Unprecedented Growth
Springfield Properties reveals remarkable growth in Dubai's residential real estate sector, driven by increased investor confidence and demand.
Unlocking Opportunities in Indian Equity Markets: An Expert Insights
Hear from Rashi Talwar Bhatia, Co-Founder of Ashmore Investment Management India, on the current state of equity markets and future trends at CafeAlt Conference 2024.
Pune's Mali Mahasangha Protests to Rename Mandai Metro Station After Mahatma Phule
Pune: Mali Mahasangha stages protest demanding Mandai Metro Station be named after Mahatma Phule, Metro administration agrees to discuss issue on October 4
Adani Group to Merge Sanghi Industries and Penna Cement with Ambuja Cements
The Adani Group is set to merge Sanghi Industries and Penna Cement with Ambuja Cements, a major move in the Indian cement industry. This strategic integration aims to strengthen the group's position and enhance operational efficiency.
CREDAI-MCHI Expo 2025: Streamlining Home Buying with Quick Bookings and Women Empowerment
The CREDAI-MCHI Expo 2025 is set to revolutionize the home buying experience in Mumbai, offering quick bookings, attractive real estate deals, and a special focus on women empowerment through its 'Pink Sunday' initiative.
Navigating the World of Commercial Real Estate: High Yields and Hidden Risks
Discover the potential of commercial real estate as an investment, including its higher rental yields, while understanding the market volatility and cost barriers that come with it. Explore how retail investors can navigate these challenges.